A new buying binge could send the credit ratings of media companies into a tailspin if the FCC relaxes broadcast ownership restrictions, Moody's debt analysts argue. Moody's predicts the FCC will remove the ban on same-market TV-station/newspaper ownership and also will raise the cap on one company's share of TV-household reach, which now stands at 35%. The operational gains won't be enough to outweigh the risks of increased debt burden, says Moody senior credit officer Neil Begley. "This would be true especially for companies acquiring television properties in larger markets or groups of broadcast properties, given the high cash flows currently being paid for such properties." Begley also warns that companies with newspaper and TV holdings in the same market will have greater concentration of ad revenue, increasing the exposure of cash flow to an economic downturn in a particular region.
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