Gray’s Prather Sees POTUS Change As Good

He didn’t reveal his own political leanings, but Gray Television President-COO Bob Prather had some thoughts to offer in his quarterly conference call on how the November election might affect the TV business. In brief: change is good.

“I think the rest of the year will be real good, even without political [after the election]. Next year probably will be a challenge, but they’re all a challenge at some point,” Prather said of the business outlook in his conversation with Wall Street analysts. Then he offered a thought on what could give TV advertising a boost in 2013.

“I frankly think that if there’s a change in the administration there’s going to be a feeling of optimism. Here again, I think there’s always that when a new president comes in. I think there’ll be a real feeling of optimism in the country that hasn’t been around for a while. That could be good news,” he said. “I’m not politicking, I’m just stating the fact that you saw that when Obama came in there was a lot of optimism and I think there will be if there’s a change again. Whether it works or not, that’s anybody’s guess.”

Meanwhile, Gray is more than willing to put the heavy political ad spending into its coffers. After reporting a record 2Q and first half, the company is looking for 3Q revenues to be up 28% to 31%. Excluding political, local is expected to be up 6% to 8% and national 6% to 7%. Also in 3Q, Gray is on track to book $4.8 million in Olympics-related advertising on its NBC stations, up from $3.4 million for the 2008 Summer Games.

Gray has not been a buyer in the recent string of station acquisitions and Prather indicated that he hadn’t seen anything up for sale that offered a better return than continuing to buy back some of Gray’s most expensive debt and improve the balance sheet.

“I think it’s a very good sign for the industry as a whole that a lot of these players are stepping up and purchasing television assets. Being here in Atlanta … it’s sort of a bullish sign from our standpoint to see Cox stepping back in and purchasing some assets,” said Gray CEO Hilton Howell of the recent trading. “I think Bob Prather’s comments are right on. We have to continue to improve our balance sheet because our goal here is to get our stock price back up. And I think that balance sheet integrity is critical. But we will look at transactions if they’re something that we can do if it doesn’t end up betting the company or leveraging us up too much, with the idea that continuing to improve our balance sheet is the preeminent goal here.”  

Veteran bond analyst Bishop Cheen of Wells Fargo Securities, joining his last call a few hours before retirement, asked Prather what it would take to close the current gap in TV valuations between the public stock market and the private transaction market.

“For one thing, Bishop, availability of money. If the money’s available the gap will close. If they can borrow more from the banks the multiples will go up. It’s as simple as that,” Prather said of the market for stations. And that, in turn, will push up stock prices. “If the finance markets are available and they’re willing to loan more, you’ll see the multiples go up, you’ll see more people trying to jump in.”