Banc of America Downgrades Spanish Broadcasting System

Analyst Jonathan Jacoby believes the acquisition of TV assets could undermine the company's de-leveraging and free cash flow growth story

Banc of America downgraded Spanish Broadcasting System (SBSA ) to neutral from buy.

Yesterday Spanish Broadcasting announced it plans to buy WDLP-TV and other television assets from Dr. William De La Pena for $37.5 million.

Banc of America analyst Jonathan Jacoby expects Spanish Broadcasting to use the cash from its recent L.A. station sale to finance this acquisition. He says he had previously expected $100 million still due from the sale to be used to strictly pay down debt; he believes this acquisition could undermine the de-leveraging and free cash flow growth story.

Jacoby cut his 32 cents 2006 free cash flow estimate to 30 cents.

He notes the company has skillfully operated in the Spanish radio marketplace, but adding TV to the mix might drain management resources.

He cuts his $11 price target to $9.50.

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