Moody’s turns positive on Nielsen


Moody’s Investors Service recently issued an update on its credit ratings for The Nielsen Company. The news is good for Nielsen’s private equity owners, as Moody’s has changed its outlook from “stable” to “positive.”

“The outlook change recognizes Nielsen’s progress in deleveraging since its 2006 LBO, driven by consistent year-on-year growth in EBITDA generation. EBITDA growth has been aided in particular by cost savings from restructuring steps taken as part of the Nielsen’s ‘Transformation Initiative’ launched in December 2006. The outlook change further acknowledges the company’s solid operating performance, particularly during a recession-hit 2009 and its return to meaningful free cash flow generation during the year. Finally, the outlook change reflects Moody’s expectation that the company will continue to generate free cash flow and can maintain de-leveraging momentum during 2010 and beyond,” the ratings agency said.

Nielsen recently reported its 2009 financial results. The debt-to-EBITDA ratio, as defined by Moody’s, improved to 7.0 times from 7.6 times a year earlier. Nielsen’s revenue increased by 4% at constant currencies during 2009 to $4.8 billion “despite a very difficult operating environment,” the report noted.

“Moody’s notes that Nielsen has made considerable progress in implementing its corporate strategy aimed at creating a unified, global client services organization with a single customer interface designed to simplify interaction. The company’s ‘Transformation Initiative’ programme (launched in 2006) is essentially complete and has achieved substantial organizational restructuring and cost savings, leading to improved profitability and aiding revenue growth potential. Nielsen has also made visible progress in the implementation of various growth initiatives (e.g. Three Screens, Answers on Demand) and has taken important steps to streamline its asset portfolio by selling non-core assets while making selective add-on acquisitions to strengthen the core business. Nielsen has re-branded its core businesses now known as Watch (media audience measurement and analytics), Buy (consumer purchasing measurement and analytics) and Expositions,” Moody’s said.

“We regard Nielsen’s near term liquidity as sufficient for its near-term needs,” Moody’s said. Nielsen had $511 million of cash and cash equivalents at the end of 2009. It has $85 million of long term debt maturing in 2010 and has access to a $688 million senior secured revolving credit facility  which was undrawn at the end of 2009. “As of 31 December 2009, Nielsen was in compliance with the financial covenants stipulated under the bank credit agreement dated 9 August 2006 and the company currently has comfortable headroom,” Moody’s said in its analysis. “However, in 2013 Nielsen needs to address very significant maturities of $3.4 billion and Moody’s would expect the company to take timely refinancing steps well ahead of time,” the rating agency said.