Moody's likes Univision's additional bond buyback


Univision Communications has been aggressively buying back some of its expensive bonds, jumping back in with a second buyback offer after the first one was greatly oversubscribed. Now Univision is preparing to sell some new bonds to buy back more of that expensive debt, which is just fine with Moody’s Investors Service.

Moody’s assigned a Caa2 rating to Univision’s proposed $315 million add-on to its existing $500 million 8.5% senior unsecured notes due 2021. That’s the same as the previous rating for the issue, but Moody’s has now upgraded the loss given default (LGD) assessment by one notch.

Univision, Moody’s notes, plans to utilize the net proceeds from the new offering to fund a redemption for any of the $1.29 billion 9.75% cash/10.5% PIK senior toggle notes due March 2015 remaining outstanding following completion of its tender offer announced on December 22, 2010 for $1,005 million of the 2015 Toggle Notes.

The current tender offer is being funded from the $1.2 billion investment made in Univision by Grupo Televisa in December. The proposed offering will replace the remaining debt with cheaper debt and reduce interest expense, so Moody’s likes what is happening to the company’s balance sheet.

“The offering favorably extends the company’s maturity profile and reduces total interest expense. The cash interest run rate will initially increase as Univision has been electing to pay-in-kind the interest on the 2015 Toggle Notes. The increase in cash interest was already factored into the ratings as Moody’s anticipated Univision would retire the 2015 Toggle Notes during 2011 or otherwise pay the interest in cash beginning in September 2011. Moody’s estimates Univision will have approximately $1.66 billion of remaining 2014 maturities if all of the 2015 Toggle Notes are retired,” Moody’s said.

Here are Moody’s LGD Updates:

..Issuer: Univision Communications, Inc.

….Senior Secured Bank Credit Facility, Changed to LGD3 – 40% from LGD3
– 41% (no change to B2 rating)

….Senior Secured Notes, Changed to LGD3 – 40% from LGD3 – 41% (no change to B2 rating)

….Senior Unsecured Notes, Changed to LGD5 – 88% from LGD6 – 92% (no change to Caa2 rating)

RBR-TVBR observation: Once again we see the receptivity of the US bond markets to media issues. How long will it be until equities are also welcomed? In that regard, we are still waiting for Nielsen’s IPO to kick that door open.