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Rating Action:

MOODY'S UPGRADES VIACOM INC.'S RATINGS TO A3 FROM Baa1 (SENIOR UNSECURED)

16 Nov 2000
MOODY'S UPGRADES VIACOM INC.'S RATINGS TO A3 FROM Baa1 (SENIOR UNSECURED)

Approximately $10 Billion of Debt Securities Affected.

New York, November 16, 2000 -- Moody's Investors Service has upgraded Viacom Inc.'s senior unsecured ratings to A3 from Baa1. The rating action conclude the review initiated on August. 16, 2000 following Viacom's announcement that it had offered to purchase the remaining shares of Infinity Broadcasting Corporation (A3 senior unsecured) that it does not currently own. The transaction is expected to be completed via a stock swap of about $13 billion of new Viacom Class B shares for the outstanding approximate 36% publicly traded Infinity shares.

The rating actions took into consideration the significant equity being issued by Viacom to fully repatriate Infinity's operations; the access to 100% of Infinity's significant free cash flow; and the expectation that Infinity's operations will be financed together with all of Viacom's other operations at the Viacom Inc. holding company, eliminating structural subordination of Viacom debt to Infinity debt with respect to Infinity cashflow and assets. The rating action also considers the strong free cash flow generation as a percentage of EBITDA, an indication of the lower capital requirements of Viacom's operations as compared to its peers.

In addition to Viacom's strong cash flows and its diversity of strong media properties and brands, the A3 rating reflects Moody's expectation that the company will maintain debt levels comfortably below 3x debt-to-EBITDA leverage for the near term and an even lower ceiling over the long-term. Excluding divestitures which are likely to occur, particularly in the television broadcasting segment in order to comply with FCC ownership rules, we anticipate the company to have a multi-billion-dollar free cash flow generation capability. Moody's expects that this robust cashflow will likely be earmarked for acquisitions, stock repurchases, and importantly to continue to maintain and ultimately improve credit metrics over time. Therefore, the outlook for the company's ratings is stable.

Significant reliance on ad spending exposes Viacom to great economic cyclicallity, particularly in its television network and owned and operated station group. The television group, with its higher cost to advertisers and its high fixed cost component for content, would be hardest hit in an economic downturn. Moody's expects Viacom to benefit from any flight to quality in ad spending with its strong brands, broad footprints and unique cross selling capabilities. We also anticipate that the company could capture some drop off in ad spending, if it were to occur at the more expensive advertising mediums, such as at the CBS network, at its more targeted and less expensive advertising channels, such as in cable television networks, in radio and in outdoor advertising. However, all of the advertising businesses would be negatively affected in a downturn. While non-advertising dependant segments such as publishing and TV and film production are hit driven and have been therefore historically inherently volatile, significant syndication backlog, large distribution networks, and co-financing arrangements have made these segments far more stable. The subscription fees generated by the cable networks also provide dependable, annuity-like income.

Viacom will likely benefit from strong, hands on management and a reduction in event risk as acquisition opportunities have narrowed within the company's primary businesses. Given the fact that much of the permissible consolidation is behind the company, Moody's expects that management's historical predominant focus on building shareholder value with substantial debt leverage will not repeat itself. Also, post-retirement and environmental liabilities that were a legacy from Westinghouse have been dramatically reduced and remove significant overhang from ratings.

Infinity's ratings and Viacom's Prime-2 commercial paper rating were not included in the review. Moody's expects that following the close of the Infinity share purchase, Infinity's bank debt (A3 senior unsecured) and its commercial paper (Prime-2) will be refinanced at Viacom Inc. and eliminated, and therefore, Moody's will withdraw those ratings when this occurs.

The debt ratings affected are as follows:

Viacom-

Sr. Unsec.:To A3 from Baa1

Viacom International Inc.-

Subordinated:To Baa1 from Baa2

Paramount Communications, Inc.-

Sr. Unsec.:To A3 from Baa1

CBS Corp.-

Sr. Unsec.:To A3 from Baa1

LT Issuer Rating:To A3 from Baa1

CBS Broadcasting Inc.-

Sr. Unsec.:To A3 from Baa1

Westinghouse Credit Corporation-

Sr. Unsec.:To A3 from Baa1

With its headquarters in New York, Viacom Inc. is one of the world's largest entertainment and media companies, and a leader in the production, promotion and distribution of entertainment, news, sports and music.

New York
Neil Begley, CPA
VP - Senior Credit Officer
Media, Telecom & Technology Grp.
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653

New York
Robert Konefal
Managing Director
Media, Telecom & Technology Grp.
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653

No Related Data.
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