Univision Communications, which is said to be holding back on its Initial Public Offering initially announced for November 2016 to early 2017, has had two of its ratings affirmed by Fitch Ratings while getting an upgrade on its senior secured rating.
Univision’s Issuer Default Rating (IDR) was affirmed by Fitch at “B,” while the company’s senior unsecured rating was also affirmed, at “CCC+/RR6.”
Concurrently, Fitch upgraded its senior secured rating to “BB-/RR2.”
The upgrade is based on Fitch’s expectations of improved recovery prospects supported by Univision’s EBITDA expansion.
Univision’s senior secured rating was upgraded while its senior unsecured rating and IDR were both supported.
The rating outlook for Univision is “Stable.”
As of June 30, 2016, Univision had approximately $9.1 billion of debt outstanding.
However, Fitch cited major Univision shareholder Televisa’s conversion of $1.125 billion of subordinated debentures to warrants for the company’s common stock as a major plus, in addition to Univision’s refinancing activities, which have reduced its average cost of debt.
Fitch also gave a thumbs up to Univision’s redemption of $415 million of the 8.5% senior notes in the first half of 2016, which was funded with cash and revolver borrowings and resulted in total debt being reduced by roughly $300 million.
However, a delayed IPO could cause further deleveraging, Fitch warns.
Proceeds from the Broadcast Spectrum Incentive Auction could help Univision, and Fitch will revisit its ratings once auction proceeds and an IPO are finalized.
“The ratings reflect Univision’s dominant market position in Hispanic media, the still attractive demographic profile of the Hispanic population, and Fitch’s expectations that advertisers will continue to grow advertising spend towards Hispanics,” the financial firm said.
But, Fitch expects that increased competition in the Hispanic media segment could slow Univision’s core television advertising growth. This will likely be offset, however, by anticipated growth in retransmission revenues, cable affiliate fees and digital advertising revenues.
As of June 30, Univision’s liquidity consisted of $33 million in cash, $530 million of availability under its revolving facility capacity, and $162 million available under the accounts receivable securitization facility (up to $400 million).
Fitch calculates Free Cash Flow of $327 million for the last 12 months ending June 2016. Univision has manageable near-term maturities with $159 million in term loan amortizations through 2019, and Fitch believes the company can address these maturities with Free Cash Flow.
The company’s next maturity hurdle comes in 2020, when $4.4 billion in senior secured term loans become due.