A company attempting to borrow money to pay a portion of its $10 billion in existing total debt -- which already has a credit rating considered junk -- would spell trouble in any language. But that's just what privately held Spanish-language broadcaster Univision Communications Inc. is doing, dimming the prospects for a turnaround.
Standard & Poor's changed its outlook on the broadcaster's ratings to stable from negative on Wednesday. The action coincides with Univision's tender for $500 million senior notes at 7.85% due 2011. One bright spot: S&P says that, if demand for the tender reaches expectations, then Univision will have more financial flexibility with its debt obligations.
Univision's new $500 million senior notes due 2014 were rated B- by S&P -- the same level as its corporate credit rating.
What's alarming for Univision is that it will use the notes to pay off existing $500
million 8.75% senior notes due 2011. At the same time, S&P points out that Univision's softness is also seen in its "failure to accomplish planned asset sales in a timely manner" and weak trends in television and advertising revenue since its 2007 LBO.
So far, Univision's planned divestitures since its LBO in 2007 have been minor. (The Deal Pipeline subscribers can see the article here.) The company sold a California AM radio station for $7.65 million in May and a Houston AM radio station for $3 million last year. Those figures hardly made a dent into Univision's debt load but helped to partly fulfill regulatory requirements related to its LBO, when it promised to divest some radio stations.
For Univision, striking a major divestiture is key to giving it more financial leeway. Without a significant selloff, the media company may be back on its merry-go-round of raising more debt to pay off maturing ones. - Gerald Magpily
See Standard & Poor's press release (subscription required)
See The Deal Pipeline: Univision's $13.7B buyout gets OK (subscription required)
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