MOODY'S CONFIRMS CBS INC'S RATINGS FOLLOWING ANNOUNCEMENT OF A MAJOR SHARE REPURCHASE AUTHORIZATION
NEW YORK, 02-04-98 -- Moody's confirmed the long-term debt ratings of CBS, Inc, (Senior at Ba1) although it added that the ratings are very weakly-positioned for its rating categories. The ratings of American Radio Systems, which CBS expects to acquire in the first half of 1998, remain under review for possible upgrade (Sr. public debt at B1).
A series of recent announcements have increased the risk profile of the company, Moody's said, including today's initiation of a $1 billion stock buy-back program, the new eight-year $4 billion agreement with the National Football League to broadcast American Football Conference games and two Super Bowls, and the planned acquisition of American Radio for $1.6 billion in cash and $1 billion of assumed debt and preferred stock. The company also has substantial underfunded pension and postretirement obligations that must be supported with periodic cash contributions as well as large, contingent environmental liabilities.
On the positive side, CBS has shown strong operating progress of its radio group, and solid ratings and earnings momentum of its TV station group and its TV network. In addition, the company recently paid down debt with proceeds from its $2.6 billion sale of Thermo King, has pending the sale of its power generation unit for $1.5 billion, most of which is expected to be tax-free, and has put the remainder of its industrial properties up for sale. The huge cost impact of the football contract may be softened through the sharing of costs by the network's affiliates and the possible ratings lift to other CBS programming. The rating agency said that CBS's Ba1 senior debt ratings factor in the completion of these sales over the near term; and went on to say that in order for CBS to maintain its current ratings, the network must continue its ratings improvements, and the radio and TV station groups must sustain their performance improvements. Moody's also expects the stock buy-backs to occur largely within the scope of its excess operating cash flows and in the context of its business opportunities. Moody's noted as positive that CBS terminated its annual dividend payment of about $140 million. Lastly Moody's said that the ratings also cannot absorb another material debt-financed acquisition because the stock buyback, unfunded liabilities, and football contract already represent significant calls on CBS' capital.
In November 1997, Westinghouse Electric Corporation was renamed CBS, Inc., and former Westinghouse debt obligations are now in the CBS name. The review affects the Ba1 rating on CBS' senior unsecured bank facility and senior unsecured notes and debentures, the (P)Ba1 rating for its senior unsecured shelf registration, and the "ba3" rating on its Series C preferred stock. The American Radio ratings under review are B1 on its senior unsecured debt, B2 on its subordinated debt, and "b3" on its preferred stock. American Radio's bank debt will likely be refinanced at closing, and the Ba2 rating on its facility will be withdrawn at that time.
CBS, Inc., formerly known as Westinghouse Electric Corporation, owns and operates a TV network, groups of TV and radio stations, outdoor advertising, and several cable networks. CBS is in the process of selling its remaining industrial properties.
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