The Nielsen Company announced plans for a private placement of $500 million in new senior notes due 2018. Moody’s Investors Service said the high-yield bond offering will be ratings neutral for Nielsen.
The Nielsen Company, which has a stock IPO pending, said the new bonds will be sold by its indirect wholly-owned subsidiaries, Nielsen Finance LLC and Nielsen Finance Co. Nielsen intends to use the net proceeds from the private offering to redeem a portion of Nielsen’s $869 million 10% senior notes due 2014 and related obligations.
As the offering was announced, Moody’s assigned a Caa1 rating to the new issues. Since the proceeds will be used to repay other debt, Moody’s said the offering will be ratings neutral for Nielsen.
In discussing Nielsen’s credit ratings, Moody’s noted that Nielsen has “a track record of steady revenue growth in its core areas” and has used increased profits to de-lever since its 2006 leveraged buyout. “The ratings also acknowledge high barriers to entry and the company’s completion of its business transformation plan in 2009. However, the ratings continue to reflect the company’s still significant leverage, the competitive and price challenges for Nielsen’s ‘Buy’ division as well as the challenges associated with those businesses which are exposed to discretionary client spending and are exposed to cyclical downturns,” Moody’s said. The Buy segment includes Nielsen’s businesses which measure consumer behavior. Its TV and radio ratings businesses are in the Watch segment.
Looking forward, Moody’s maintains a “positive outlook” for Nielsen’s debt ratings. “A positive outlook is based on the expectation that Nielsen will continue to be free cash flow positive and can maintain de-leveraging momentum during 2010 and beyond, while at the same time taking the refinancing initiatives necessary to address its upcoming maturities. The (proposed) Caa1 rating also takes into account the proposed notes’ effective subordination to Nielsen’s senior secured debt,” Moody’s explained.
Moody’s also commented on the pending $2 billion IPO, whose proceeds will be used to pay down debt. “Moody’s understands that Nielsen remains committed to the IPO process. Should the IPO proceed as currently described in the filing and debt be reduced materially and be sustained at the reduced level, strong upward pressure from the current B2 CFR would result. Moody’s will closely monitor the further evolution of the IPO process and comment from time to time as warranted,” the debt ratings agency said.
