Moody’s Investors Service has lowered its ratings on the debt load of Univision Communications following the radio and TV company’s announcement of Q2 revenue results, with both revenues and EBITDA declining. Moody’s says it appears the weak ad market and lower than anticipated asset sale proceeds will prevent Univision reaching its leverage target of 9X this year.
Moody’s is not finished yet. It will keep Univision’s ratings on $10.8 billion of debt under review for a possible additional downgrade.
“In the review, Moody’s will evaluate the effect that continued weakness in client advertising spending could have on Univision’s cash flow and liquidity position. Moody’s will consider Univision’s ability to execute on revenue opportunities and reduce cash operating and interest costs to mitigate the effect of weaker client spending, as well as the company’s plan to reduce its very high leverage and its progress in completing asset sales. As part of the review, Moody’s will also consider ongoing developments with respect to the Televisa litigation and the range of potential outcomes,” Moody’s said.
The rating agency said Univision has adequate liquidity over the 12-month, but noted that maintaining adequate liquidity will be crucial to maintaining the new debt ratings. “Moody’s projects Univision’s cash burn rate to be approximately $50-100 million over the next 12 months (after World Cup rights payments and assuming cash interest on the $1.5 billion senior notes), creating reliance on asset sale proceeds and cash from the April
2008 credit facility drawdowns to fund $635 million of maturities over the next 12 months. Moody’s estimates that Univision’s covenant-defined EBITDA could decline in a 12-15% range from its current level within the first-lien senior secured leverage covenant through September 2009. The rating agency considers the level of cushion adequate at this time, but continued weakness in the advertising market could erode this cushion,” Moody’s said.
Here are the ratings actions announced by Moody’s:
Downgrades:
Issuer: Univision Communications, Inc.
Corporate Family Rating, Downgraded to B2 from B1
Probability of Default Rating, Downgraded to B2 from B1
Senior Secured Bank Credit Facility, Downgraded to B1, LGD3 – 40% from Ba3, LGD3 – 39%
Senior Secured Bonds, Downgraded to B1, LGD3 – 40% from Ba3, LGD3 – 39%
Second Lien Asset Sale Bridge Credit Facility, Downgraded to Caa1, LGD5 – 86% from B3, LGD5 – 86%
Senior Unsecured Regular Bonds, Downgraded to Caa1, LGD6 – 93% from B3, LGD6 – 92%
Multiple Seniority Shelf, Downgraded to (P)Caa1 from (P)B3
Outlook Actions:
Issuer: Univision Communications, Inc.
Outlook, Changed To Rating Under Review From Negative
