Filed Under: Blogante Business, Business, Press Releases
Tagged: Univision
itch Ratings has assigned a ‘B+/RR3′ rating to Univision Communications, Inc.’s (Univision) senior secured note offering. The proceeds are expected to be used to tender the company’s 7.85% notes due 2011. Univision’s Issuer Default Rating (IDR) is rated ‘B’. The Rating Outlook is Stable.
Univision’s ratings and Outlook are at the low end of their categories. The ratings are constrained by a highly leveraged capital structure, which leaves creditors with a very limited margin of safety. Fitch maintains a conservative view of the prospects for economic weakness, but acknowledges that the rating is susceptible if advertising underperforms Fitch’s grim outlook.
Over the latest 12 months, Fitch has commented that Univision faced several obstacles over the intermediate term. Importantly, two of those obstacles ? payment of the second-lien loan and the Grupo Televisa S.A. (Televisa) litigation ? have largely been resolved. Fitch believes the company’s remaining major obstacle over the intermediate term concerns the impact the existing economic downturn will have on Univision’s ability to make interest and principal amortization payments and meet covenant step-downs. In Fitch’s view, Univision should have the ability to meet these obligations.
While 2009 should be extremely difficult for advertising revenues, Fitch believes retransmission revenues, paid-in-kind (PIK) interest, and the maturation of $7 billion of higher-than-market interest rate swaps should provide the additional liquidity needed for debt compliance over the short term. Fitch’s current expectations are for advertising revenue to be down in the 10% range, comprised of national advertising likely down in the low single digits and local advertising down more than 15%. However, Fitch expects Univision’s net first-lien leverage to remain below the covenant limit of 11.25 times (x) by year-end 2009 and that the company should be able to handle future covenant step-downs.
The ratings are supported by Univision’s underlying portfolio of assets, which include duopoly television and radio stations in most of the top Hispanic markets, with a national overlay of broadcast and cable networks.
Liquidity is supported by approximately $473 million of cash on hand on March 31, 2009. The company had approximately $43 million of cash remaining in the Reserve Fund at that same time and received a distribution of $17 million in April 2009. Additionally, the company used $150 million to permanently reduce its revolver borrowings on June 19, 2009. The company’s remaining maturity schedule includes principal amortization on its term loans of approximately $150 million in 2010 and $200 million in 2011. Univision’s $500 million 7.85% senior notes mature in July 2011, potentially bringing total 2011 maturities above $700 million. Principal amortization is reduced to less than $90 million per year thereafter. Fitch’s expectations are for the company to generate positive cash flow in 2010 and 2011 and to be able to handle these maturities organically. Remaining bullet maturities begin in 2014 and are substantial.
The Recovery Ratings and notching reflect Fitch’s recovery expectations under a distressed scenario. Univision’s recovery ratings reflect Fitch’s expectation that the enterprise value of the company, and hence, recovery rates for its creditors, will be maximized in a restructuring scenario (going concern), rather than a liquidation. Fitch has recently reduced its market multiple to 7x from 9x, reflecting the existing difficult economic environment. The 7x market multiple reflects the company’s FCC licenses in top U.S. markets, the elimination of the Televisa litigation and long-term growth prospects, among other things. Fitch estimates the adjusted distressed enterprise valuation in restructuring to be approximately $4.4 billion. The ‘B+/RR3′ rating for the secured debt reflects Fitch’s expectations for recovery at the low end of the 51%-70% range under a bankruptcy scenario.
For additional information, please see Fitch’s 10-page report on Univision published today and available on Fitch’s web site at www.fitchratings.com.
Fitch’s rating definitions and the terms of use of such ratings are available on the agency’s public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch’s code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the ‘Code of Conduct’ section of this site.
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Jamie Rizzo, CFA, 212-908-0548, New York
Mike Simonton, CFA, 312-368-3138, Chicago
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Knowledge is Power and this page is just the start. Hispanics/Latinos are a growing diverse force in this country. Check out some of the 54,753 items found on this site below or dig into the Site Map
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