Univision Communications is set to sell $600 million in senior secured notes due 2019, using the proceeds to redeem some more expensive notes which otherwise would come due in 2014. Both Moody’s Investors Service and Fitch Ratings have issued ratings actions which give thumbs up to the financial maneuvers.
“Although the issuance and tender will not reduce total debt or leverage, they will lessen interest cost by approximately $10 million-$20 million (depending on final pricing). More important, they will extend the 2014 notes maturity by five years, and remove the last note that comes due before all of Univision’s bank debt,” said Fitch in its analysis. It put a B+ rating on the new issue, which is a few notches into junk bond territory.
Fitch estimates that Univision has $1.1 billion of bank debt maturing in 2014, $308 million maturing in 2016 (including $300 million outstanding under the A/R securitization facility), and $5.7 billion maturing in 2017). “As a result, Univision will have the ability to focus its debt reduction efforts over the next several years solely on the bank debt, which should provide more flexibility to refinance it at maturity,” the ratings agency said.
Moody’s assigned a B2 rating (also a junk bond or high-yield bond rating) to the $600 million issue.
“The refinancing improves Univision’s maturity profile, reduces refinancing risk related to its 2014 maturities (approximately $1.1 billion upon completion of the proposed offering), and will moderately reduce cash interest expense. Moody’s does not expect the $55 million increase in debt as a result of funding the tender premium on the 2014 notes to materially alter Univision’s current leverage position or the expected de-leveraging over the next few years,” Moody’s said.
RBR-TVBR observation: The old bonds being redeemed carry a 12% coupon, so it’s pretty likely that Univision will be able to reduce interest costs with this refinancing. Not only has its business improved post-recession, but the big investment by Televisa late last year made its balance sheet more attractive as well.