MOODY'S CONFIRMS RATINGS FOR WESTINGHOUSE ELECTRIC CORP. (SENIOR AT Ba1) FOLLOWING AMERICAN RADIO SYSTEMS CORP. ACQUISITION AGREEMENT ANNOUNCEMENT, PLACES AMERICAN RADIO SYSTEMS RATINGS UNDER REVIEW FOR POSSIBLE UPGRADE (SUB AT B2)
NEW YORK, 09-19-97 -- Moody's Investors Service confirmed Westinghouse Electric Corp.'s credit ratings (senior unsecured at Ba1) following the company's announcement that it has reached a definitive agreement to acquire American Radio Systems Corp.'s radio broadcast operations for $1.6 billion in cash plus the assumption of approximately $1 billion in debt. Moody's also placed American Radio Systems Corp.'s credit ratings under review for possible upgrade (senior subordinated at B2, preferred stock at "b3").
According to Moody's, Westinghouse's announcement of its agreement to acquire American Radio Systems closely follows the company's announcement of its plan to sell its Thermo King operation to Ingersoll Rand in a cash transaction valued at $2.56 billion, expected to close in late October 1997. A substantial portion of the proceeds from the Thermo King sale, which will be shielded by net operating losses, will be used for debt reduction, but -- given that Westinghouse plans to finance the $1.6 billion cash portion of the American Radio purchase when it closes in the second quarter of 1998 with borrowings -- the debt and interest expense reduction arising from the Thermo King sale will be only temporary. Moody's anticipates that Westinghouse's balance sheet leverage will return to a level similar to what currently exists once the American Radio Systems acquisition closes.
According to the rating agency, American Radio Systems occupies leading shares in most of its markets and is also well diversified geographically. American Radio Systems' properties complement Westinghouse's CBS Radio properties, which are largely concentrated in the top ten radio markets in the United States, by significantly expanding Westinghouse's reach into the ten-through-fifty largest radio markets in the U.S. Although American Radio Systems generates a lower absolute cash flow (as measured by EBITDA) than Thermo King, American Radio Systems' revenues are growing whereas Thermo King's revenues are flat-to-declining.
At the time of the Thermo King sale announcement, it was Moody's belief that the benefit of debt reduction from the Thermo King sale would likely outweigh the planned retention by Westinghouse of all the industrial non-Thermo King pension and post-retirement liabilities (approximately $1 billion) when Westinghouse completes its plan to separate its industrial and media businesses by year end. As a result, Moody's modified its rating outlook for Westinghouse's debt from weak to improving. However, now that Westinghouse's debt reduction is expected to be only temporary, Westinghouse's rating outlook is once again weakened.
In its review of American Radio Systems' ratings, Moody's will assess the degree of support provided to American Radio Systems' debt and preferred stock by Westinghouse when it acquires the company.
Westinghouse Electric Corporation, headquartered in Pittsburgh, Pennsylvania, is a globally diversified broadcasting, media, and industrial equipment company.
American Radio Systems Corp., headquartered in Boston, Massachusetts, owns and operates 98 radio stations spread throughout the United States.
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