APN News & Media Ltd. holds a diversified portfolio of media assets across Australia, New Zealand, and Hong Kong, including positions in radio broadcasting, publishing, and outdoor advertising. While this provides some diversification away from structurally declining print media, APN remains exposed to cyclical advertising volumes and structural challenges. Financially, APN's leverage is significant but expected to improve over the next two years if it can generate sufficient free cash flow without large acquisitions. The stable outlook reflects the view that APN's diversification will allow it to maintain adequate credit metrics through the ongoing industry changes.

1. Summary:
APN News & Media Ltd.
Primary Credit Analyst:
Paul R Draffin, Melbourne (61) 3-9631-2122; paul.draffin@standardandpoors.com
Secondary Contact:
Karan Rathod, Melbourne +613 9631 2011; karan.rathod@standardandpoors.com
Table Of Contents
Rationale
Outlook
Standard & Poor's Base-Case Scenario
Business Risk
Financial Risk
Liquidity
Ratings Score Snapshot
Recovery Analysis
Related Criteria And Research
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2. Summary:
APN News & Media Ltd.
Business Risk: FAIR
Vulnerable Excellent
Financial Risk: SIGNIFICANT
Highly leveraged Minimal
bb bb bb
Anchor Modifiers Group/Gov't
CORPORATE CREDIT RATING
BB/Stable/--
Rationale
Business Risk: Fair Financial Risk: Significant
• Diversified portfolio of media assets across
Australia, New Zealand, and Hong Kong
• Exposure to cyclical advertising volumes and
structural decline in print
• Acquisitive growth strategy and ongoing reshaping
of media portfolio toward growth assets
• Significant financial risk profile, with limited
headroom at the current rating level
• Good free cash-flow generation
• Adequate liquidity
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3. Outlook: Stable
The stable outlook reflects our view that APN News & Media Ltd.'s (APN) business diversity, particularly its
significant position in radio broadcasting, will provide sufficient buffer to offset the continued structural decline in
newspaper publishing and cyclical advertising revenues. This diversity, together with a prudent approach to capital
management, should enable the company to maintain its funds from operations (FFO)-to-debt of greater than 20%.
The stable outlook does not incorporate any event risk associated with any potential transaction activity, including
those that may be prompted by changes to Australia's media ownership laws.
Downside scenario
Downward rating pressure could occur if APN's market position deteriorates materially such that the company's
diversification does not provide it with sufficient buffer against structural weaknesses in any of its key media
businesses. Downward rating pressure could also occur if weaker operating performance or debt-funded
acquisitions caused a significant worsening in the group's financial risk profile, including FFO-to-debt sustained at
less than 20%.
Negative rating pressure could also arise if a potential divestment of the group's New Zealand businesses causes a
reduction in APN's business scale and diversity without an offsetting improvement in the group's financial risk
profile. In addition, further sizable debt-funded acquisitions or an overall increase in the group's financial risk
appetite could also pressure the rating.
Upside scenario
Upward rating movement is considered unlikely in the near term based on the group's current business mix and
financial risk profile. We may consider raising the rating if APN adopts a more conservative financial risk appetite
and manages its exposure to the continued decline in newspaper publishing prudently and effectively.
Standard & Poor's Base-Case Scenario
Assumptions Key Metrics
• Structural decline continues in both its Australian
and New Zealand publishing businesses;
• No material loss of market share in APN's radio
businesses;
• Adjusted EBITDA margins in the 21%-23% range;
• Capital expenditure of A$20 million-A$35 million
per annum; and
• No dividends in the near term.
Year end Dec 31 2015A* 2016F 2017F
FFO to debt (%) 20.4 20-22 20-25
Debt to EBITDA (x) 3.5 3-3.1 2.8-3.1
*Based on preliminary accounts. A—Actual.
F--Forecast. FFO—Funds from operations.
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Summary: APN News & Media Ltd.

4. Business Risk: Fair
APN holds a diversified portfolio of media businesses in Australia, New Zealand, and Hong Kong, which include
positions in radio broadcasting, publishing, and outdoor advertising. In our view, supporting the company's business
risk profile is a portfolio of media assets that provide the company with a meaningful level of diversification away from
the structurally declining newspaper industry. We also consider the company's recently announced plans to divest its
regional Australian newspaper operations could support its business risk profile. APN does however remain heavily
exposed to cyclical advertising volumes, a high fixed-cost base, and the ongoing structural erosion of advertising and
circulation revenues in its newspaper businesses.
APN's Australian radio operations, which account for about half of the group's EBITDA, are considered the best
positioned of the group's businesses. This business is well diversified across Australia, and has recorded above-market
revenue growth in the past few years, supported by key talent acquisitions. Radio is also proving more resilient to
adverse structural media industry trends plaguing other traditional media segments such as print. The radio
businesses, together with the group's small but growing outdoor advertising business, are expected to represent the
key revenue drivers for the group in the next few years. Nonetheless, we expect the radio business to remain cyclical
and heavily reliant on key talent to drive ratings and advertising revenues. We also expect the radio industry to face
longer-term structural risks as advertising markets continue to fragment toward new and evolving distribution
channels.
APN's New Zealand-based assets, which comprise radio, print, and digital assets, are currently managed under a single
integrated management structure. APN announced its intention to partially divest its New Zealand operations in 2014.
Although these divestment plans were subsequently shelved due to poor market conditions, a future sell-down may be
considered by the company. In this regard, we consider that any potential divestment would lead to a meaningful
reduction in APN's scale, scope, and diversification. Importantly, however, demerger proceeds could offset any credit
impact at the current rating level by reducing the group's financial risk profile. Accordingly, the ultimate rating
impact--if such a transaction were to proceed--would be contingent upon the final transaction structure as well as the
group's financial policies and future growth strategy.
Financial Risk: Significant
The acquisition of 96FM in early 2015 pushed the group's financial risk profile to the weaker end of tolerances for the
rating, with FFO to debt at December 2015 at just above 20% (based on preliminary account disclosures). However,
under our base case–which does not incorporate any acquisitions or divestment of the Australian regional print
business–we expect APN's financial risk profile to improve during 2016, with adjusted debt to EBITDA falling from the
mid to the low 3x level, in line with expectations for the rating. Supporting this deleveraging would be the group's
modest capital expenditure requirements and no dividends.
Based on the group's current business mix, we expect the group's financial risk profile to remain in line with tolerances
for the current rating level. In this regard, the company has indicated a willingness to leverage beyond its financial
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5. policies where management considers there to be a clear path to returning its net debt-to-EBITDA level to less than
3.0x. Nonetheless, based on the group's current financial profile, we view APN as having limited headroom at the
current rating.
Liquidity: Adequate
We consider APN to have an adequate liquidity profile and expect the group's sources of liquidity to exceed its uses by
more than 1.2x over the next 12 months.
Principal Liquidity Sources Principal Liquidity Uses
• Cash and cash equivalents of about A$22 million at
Dec. 31, 2015.
• Cash FFO of A$80 million to A$90 million; and
• Undrawn bank facilities of A$163 million.
• Capital expenditure of A$25 million-A$35 million.
Ratings Score Snapshot
Corporate Credit Rating
BB/Stable/--
Business risk: Fair
• Country risk: Very low
• Industry risk: Intermediate
• Competitive position: Fair
Financial risk: Significant
• Cash flow/Leverage: Significant
Anchor: bb
Modifiers
• Diversification/Portfolio effect: Neutral (no impact)
• Capital structure: Neutral (no impact)
• Financial policy: Neutral (no impact)
• Liquidity: Adequate (no impact)
• Management and governance: Fair (no impact)
• Comparable rating analysis: Neutral (no impact)
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6. Recovery Analysis
The issue rating on the senior secured syndicated bank facility is 'BB', reflecting a recovery rating of '4' and our
expectation of average recovery prospects (30% to 50%, upper end of range) in the event of default.
Our simulated default scenario contemplates a default in 2019 and is precipitated by an acceleration of the structural
decline in APN's traditional publishing businesses. This is coupled with a cyclical downturn in advertising revenue,
which triggers earnings erosion across APN's entire portfolio of media businesses. We anticipate APN would be valued
as a going concern, given its market position in its key business segments.
Related Criteria And Research
Related Criteria
• Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Dec. 16, 2014
• Criteria - Corporates - Recovery: Revised Revolver Usage Assumptions For Recovery Analysis In Corporate Ratings,
Nov. 20, 2014
• Key Credit Factors For The Media And Entertainment Industry, Dec. 24, 2013
• Methodology: Industry Risk, Nov. 19, 2013
• Group Rating Methodology, Nov. 19, 2013
• Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013
• Corporate Methodology, Nov. 19, 2013
• Corporate Methodology: Ratios And Adjustments, Nov. 19, 2013
• Management And Governance Credit Factors For Corporate Entities And Insurers, Nov. 13, 2012
• Criteria - Corporates - Recovery: Criteria Guidelines For Recovery Ratings On Global Industrials Issuers'
Speculative-Grade Debt, Aug. 10, 2009
• 2008 Corporate Criteria: Rating Each Issue, April 15, 2008
Standard & Poor's (Australia) Pty. Ltd. holds Australian financial services licence number 337565 under the Corporations Act 2001. Standard &
Poor's credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale
client (as defined in Chapter 7 of the Corporations Act).
Business And Financial Risk Matrix
Business Risk Profile
Financial Risk Profile
Minimal Modest Intermediate Significant Aggressive Highly leveraged
Excellent aaa/aa+ aa a+/a a- bbb bbb-/bb+
Strong aa/aa- a+/a a-/bbb+ bbb bb+ bb
Satisfactory a/a- bbb+ bbb/bbb- bbb-/bb+ bb b+
Fair bbb/bbb- bbb- bb+ bb bb- b
Weak bb+ bb+ bb bb- b+ b/b-
Vulnerable bb- bb- bb-/b+ b+ b b-
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Summary: APN News & Media Ltd.

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