CBS bonds heading toward junk


Shares of CBS Corporation fell on Monday after Standard & Poor’s cut its bond ratings to one step above junk bond status – with a “negative” outlook indicating that another downgrade is likely.

Moody’s Investors Service already had CBS just one step from junk bond status, so the S&P move from BBB to BBB- was hardly surprising. However, the market did not like the negative comments about the advertising marketplace from S&P analyst Heather Goodchild. CBS’ heavily traded Class B stock fell as low as $8.29 during Monday trading, but had recovered most of the ground by the end of the day to close at $8.69, down 0.5% for the day.

“The ratings downgrade is based on our concern that the company’s efforts thus far to rein in leverage through cost and dividend reductions have been more than offset by revenue weakness. We believe that the extent and pace of a recovery, especially in local TV and radio, is highly uncertain, given structural shifts in end-market ad demand,” Goodchild wrote.

CBS Corporation’s ratings were removed from S&P’s “Creditwatch” list, so no further downgrade is imminent. On the positive side, S&P noted the company’s “leadership positions in netowrk TV, outdoor advertising and syndicated TV production.”