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OUTFRONT Media Prices Private Offering of $500M Senior Notes

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OUTFRONT Media Inc.’s (OUT - Free Report) two wholly-owned subsidiaries recently priced a private offering of 4.625% senior unsecured notes due 2030. The offering of $500 million in aggregate principal amount was priced at par. The transaction is anticipated to close on Nov 18, subject to customary closing norms.

OUTFRONT Media intends to utilize net proceeds from the private offering to redeem in total the company’s 5.875% senior notes, due in 2025, worth $450 million. It will also pay accrued and unpaid interest on these outstanding notes as well as fees and expenses related to the notes offering and redemption. Any remaining balance will be added as cash to the balance sheet, boosting the company’s liquidity.  

In fact, the note offering was favorably viewed by Moody's Investors Service, the rating division of Moody’s Corporation (MCO - Free Report) . The rating agency assigned a B1 rating to the proposed offering and also announced that ratings on the 2025 senior unsecured notes will be withdrawn after it is redeemed.

OUTFRONT Media has a Ba3 corporate family rating (CFR), Ba1 senior secured rating and the B1 rating for the existing senior unsecured notes by Moody’s. Additionally, the rating agency’s outlook on the company remains unchanged at stable.

Per Moody’s, OUTFRONT Media’s Ba3 CFR indicates the company’s market position as one of the leading outdoor advertising companies in the United States, with a footprint in nearly 140 markets in the nation and Canada. Moreover, the rating agency views the company’s efforts to convert its traditional static billboards and transit displays to digital as revenue and EBITDA growth drivers.

OUTFRONT Media has renewed its contract with the New York Metropolitan Transit Authority (MTA). This will facilitate deployment of more than 50,000 digital transit displays (including platform, railcar and subway displays) in the upcoming period. Moody’s noted that this digital rollout has increased new advertising relationships, offering incremental value to advertisers and growth opportunities for the company.

Moody’s also acknowledges industry-wide favorable factors like restrictions on billboard supply (that drives advertising rates and high asset valuations). Additionally, the company’s good liquidity position is supported by its proposed upsized $500-million revolver maturing in 2024 and cash on hand of $58.3 million as of third-quarter 2019. Further, Moody’s anticipates free cash flow to improve in the upcoming period.

On the downside, the rating agency noted that the company’s EBITDA margins are lower compared with the industry average of its U.S. competitors. In fact, lower margin in the transit business will likely impact EBITDA.

Over the past six months, shares of this Zacks Rank #4 (Sell) company have declined 7.2%, wider than the industry’s loss of 0.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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