CBS selling $600 million in new bonds


CBS Corporation is doing some reworking of its balance sheet. As it announced a tender to buy back $250 million of its outstanding debt due in 2012, it is also selling $600 million of new bonds that won’t come due until future decades.

CBS Corp. on Monday (10/4) priced a debt offering of $300 million of 4.30% senior notes due 2021 and $300 million of 5.90% senior notes due 2040. Some of the proceeds from the combined $600 million in bond sales will be used to fund the $250 million buyback, with the rest going to “general corporate purposes.

Moody’s Investors Service assigned a Baa3 rating to the new issues, the same rating as the previous bond issue by CBS. Baa3 is the lowest investment grade credit rating at Moody’s.

Moody’s noted the plan to use some of the proceeds for the announced $250 million bond buyback tender. “Additionally, Moody’s expects that CBS will use the remaining proceeds to fund an anticipated call of its $335 million 7.25% senior notes due 06/30/51. The transactions will be essentially leverage-neutral and will have no impact on the company’s debt-to-EBITDA leverage ratio and its Baa3 senior unsecured rating. However, in Moody’s opinion, the refinancing positively affects CBS’s interest costs and debt maturities and demonstrates the company’s commitment to maintaining solid liquidity and a manageable maturity profile,” the ratings agency said.

Indeed, just a few hours later CBS Corp. announced that it would call for redemption all of those 7.25% senior notes due 2051 on November 5, 2010 – 41 years before they would come due.

“CBS’s Baa3 senior unsecured debt ratings are supported by its leadership position in the media and advertising industry – as indicated by its significant revenue scale, a very valuable asset base of large market businesses and iconic brands in each of its segments, and stable double-digit operating margins. The rating reflects CBS’s relatively high exposure to cyclical economic swings, its moderately leveraged balance sheet with debt-to-EBITDA of 4.0x (as of 6/30/2010, incorporating Moody’s standard adjustments), which we anticipate will continue to decline over the intermediate term to pre-recession levels (to under 4.0x), which we expect will solidly position the company in the Baa3 rating category,” Moody’s said in its rating announcement.