Brill Media Ratings Lowered to 'B-' by S&P; Outlk Neg.

NEW YORK--(BUSINESS WIRE)--June 11, 1999--

Standard & Poor's today lowered its corporate credit and senior unsecured debt ratings for Brill Media Co., LLC and Brill Media Management, Inc. to single-'B'-minus from single-'B'.

The downgrade is based on the company's operating performance, which has been below Standard & Poor's expectations; weak discretionary cash flow; and diminished liquidity. In addition, the 7.5% cash coupon on the company's senior notes steps up to 12% in June 2000, increasing financial pressure.

The outlook is negative.

The ratings reflect Brill's high financial risk from debt-funded media acquisitions, weak interest coverage, and a very small cash flow base provided by radio and newspaper operations in smaller markets, as well as Standard & Poor's expectations for limited future growth. Offsetting these concerns are the company's good positions within its markets; the clustering of media assets, which provide for scale economies and increased sales opportunities; and modest cash flow diversity.

Brill owns, operates, or manages 10 FM and five AM radio stations in five small markets ranked 100 or smaller. About half of total company cash flow (including interest income from managed radio stations) is from radio operations. The stations currently rank first or second in both ratings and revenue share. While Brill's presence in each market (with an average of three stations) appears small, the markets themselves can only support a few stations each, and even these limited station holdings can result in strong revenue shares. The key constraint for the radio group is the amount of ad revenues that can be generated in these small markets.

The newspaper operation consists of a 12,700 paid circulation daily paper, as well as 27 weekly shopping guides and one weekly paper that are delivered free to over 400,000 households in Central Michigan. The newspapers' market covers a wide area with low population density, making print an effective local advertising medium. The daily and weekly publications share production facilities, providing operating efficiencies.

Brill's earnings before interest, taxes, depreciation, and amortization (EBITDA) margin for the fiscal year ending Feb. 28, 1999 was about 21%, down from about 24% in 1998 due to acquisitions of lower-margin publications and increased radio promotional expenses. EBITDA plus interest income from managed radio stations divided by total interest expense (including non-cash interest) was about 0.8 times for both periods. Flexibility will decrease significantly in June 2000 when the senior notes' cash coupon increases.

OUTLOOK: NEGATIVE

Ratings may be downgraded in the absence of meaningful cash flow improvement and progress in improving key credit measures, Standard & Poor's said. -- CreditWire