Viacom note offering translates to business as usual


Content giant Viacom is offering $500M worth of 10-year notes, and Moody’s Investors Service has weighed in on it. In general, the plan will not significantly impact the company’s leverage position, nor will it significantly impact its overall corporate rating.

A lot of times when a company puts out a new bond issue, it is looking to pay-off other financial instruments that are about to mature, in essence kicking their debt down the road.

Other times, the company may be seeking to fund a major acquisition.

According to Moody’s, the ultimate purpose this time is simply for general corporate purposes. In particular, Moody’s believes Viacom plans to pay down debt and buy back shares.

It suggests that one of the major motivators in making the move right now are the low interest rates that are currently in vogue.

Leverage at Viacom is only 2.6x, and this move is not expected to budge it any higher than 2.7x.

The bond offering has been given a Baa1 rating. Moody’s explained, “The Baa1 senior unsecured rating reflects Viacom’s strong, narrowly focused demographic brands which attract advertisers to its media networks and that have high competitive barriers given the difficulty of attaining full carriage among the various pay TV distributors today. The Baa1 also considers the company’s position as one of only a handful of major global film studios and distributors. The nationally recognized and in some cases, internationally recognized brands supported by superior creative content, provide the company with flexibility to leverage its content using multiple distribution channels including digital and mobile devices in our view.”

Moody’s believes leverage will quickly move back to 2.5x in the near term with an attainable goal of 2.0x. It says the company’s financial situation will begin to present cause for worry if it moves beyond 2.75x, and will be increased if it manages to go lower than 1.75x.

RBR-TVBR observation: Money, it turns out, is cheap right now. And while its one thing to take out a cheap loan for a luxury item, when a loan is used to lower interest costs and otherwise lower debt, its hard to argue with it.