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Global Credit Research - 06 Oct 2010
Mexico, October 06, 2010 -- Moody's Investors Service and Moody's de Mexico today affirmed their
respective Baa1 and Aaa.mx ratings on Grupo Televisa, S.A.B.
(Televisa) upon the company's announcement of its planned USD1.2
billion investment in Univision. The outlook for the ratings is
On October 5th, 2010, Televisa announced a USD1.2 billion
cash investment in Univision Communications, Inc ("Univision",
B3 Stable), mostly in the form of convertible debentures due 2025.
The closing of the transaction, which will depend on certain conditions
precedent, should occur by the first quarter of 2011. Upon
closing, Televisa would hold, on a fully diluted basis,
about 35% of the capital of Univision. As part of the transaction,
the current PLA (Program Licensing Agreement) between the companies will
be changed and extended to 2020 from 2017.
"The ratings affirmation reflects Moody's expectation that Televisa's
management will continue to pursue an investment strategy that will maintain
the company's financial metrics at levels consistent with its current
ratings (Moody's adjusted financial leverage at less than 2.5
times and cash flow from operations as a percentage of debt of at least
30%)" said Nymia Alemida, Vice President - Senior
Analyst at Moodys. The ratings affirmation was also based on Moody's
understanding that Televisa will not hold controlling interest in Univision
and thus will not be exposed to the company beyond the amount of investment
just announced. The ratings affirmation considered as well that
Televisa's announced investment at Univision should trigger an improvement
in the latter's debt maturity profile, reducing Televisa's
investment risk. Moody's perceives the investment in Univision
as strategically positive, providing Televisa with growth opportunities
at a valuation multiple that reflects a low point in the advertising cycle.
Moody's expects that the announced USD1.2 billion investment in
Univision as well as the pending USD1.44 investment in Nextel Mexico
will be financed with cash on hand plus proceeds from new local 10-year
notes in the amount of up to MXN10 billion (equivalent to about USD770
million) expected to be issued before the end of the year. In this
scenario, Televisa's financial leverage is not likely to increase
materially beyond 2 times adjusted debt/EBITDA, as expected for
Televisa's ratings are supported by the group's strong competitive position
in the Mexican television and pay TV markets, its financial strength
and its stable operating performance. The company's advertisement-heavy
business model has proven resilient during the last economic downturn
in Mexico, in 2007-2009, and particularly when compared
to the company's international diversified media peers. Nominal
TV broadcasting sales in the last twelve months were slightly higher (by
2.7%) as compared to the trailing twelve months ended in
June 2009 and despite the deep economic recession, especially in
2009. Televisa's comfortable debt maturity profile for the next
several years also supports its ratings. Constraining Televisa's
ratings, however, are its smaller global scale in terms of
revenue when compared to diversified media peers and the company's lack
of transparency over its long-term leverage target.
Televisa's pending investments in Univision and Nextel Mexico will
reduce its financial flexibility given the significant depletion of its
dollar cash position once these investments are funded. However,
Moody's expects that Televisa will maintain a comfortable liquidity
position. We expect that the company will end 2010 with a minimum
of USD1 billion in cash, pro forma for the upcoming investments
in Univision and Nextel as well as the new local notes and future cash
flows. This cash position compares to total adjusted (for operating
leases and pension obligations) debt of USD3.5 billion as of June
2010, which mostly matures starting in 2016. Going forward,
while the company rebuilds its cash position, Moody's expects that
it will offset its exposure to foreign currency liabilities by entering
into foreign exchange swaps or other derivative arrangements that hedge
at least debt coupons for the following 12 to 24 months. Televisa
has substantial headroom under its maintenance financial covenants,
including those of relevant subsidiaries. As is the practice in
Latin America, Televisa does not maintain committed revolving credit
The stable outlook is based on Moody's belief that Televisa's
management will not put its current ratings at risk as it pursues its
investment strategy. The stable outlook also reflects Moody's expectations
that Televisa will maintain operating margins and leverage at around current
levels and a comfortable debt maturity profile. In addition,
Moody's assumes that Televisa will pay no dividends in 2010.
In the years to come, the agency believes that the company will
manage its cash outflows prudently so that cash on hand in U.S.
dollars does not fall below the amount of USD1 billion. In 2011,
the agency expects that, because of the large investments announced
recently, namely Nextel Mexico and Univision, Televisa will
refrain from paying dividends beyond the ordinary amount of MXN0.35
per share, or approximately USD80 million.
The group's ratings could experience upward pressure if it increases its
scale and diversification to the point that its credit metrics are less
susceptible to the potential impact of large acquisitions or capex.
Ratings could come under downward pressure if weak performance of the
company's core TV broadcasting, pay TV systems (DTH and cable) or
telecom businesses leads to credit metrics no longer consistent with the
current rating category, with gross debt to EBITDA sustained over
2.5 times and cash from operations trending down and sustained
below 30% of debt. In addition, Televisa's ratings
suffer downward pressure if cash on hand falls below USD1 billion,
held in U.S. currency.
The last rating action on Televisa's ratings were in September 1st,
2010 when Moody's Investors Service assigned a Baa1 global ratings and
Moody's de Mexico assigned an Aaa.mx national scale ratings to
Televisa's proposed up to MXN10 billion in senior unsecured Mexican notes
The principal methodology used in rating Grupo Televisa, S.A.B.
was Large Global Diversified Media Industry rating methodology published
in November 2007. Other methodologies and factors that may have
been considered in the process of rating this issuer can also be found
on Moody's website.
With its headquarters in Mexico City, Mexico, Grupo Televisa,
S.A.B. ("Televisa") is the largest diversified media
company in terms of market capitalization, in the Spanish-speaking
world. Last-twelve-months revenues as of June 2010
amounted to approximately USD4.3 billion and adjusted (for Moody's
standard adjustments) EBITDA margin reached 40%. Televisa's
main business is television broadcasting, which represents approximately
39.5% of revenues and 49% of Operating Segment Income,
as reported. Televisa has interest in the largest DTH (direct-to-home)
satellite service provider in Mexico as well as in three cable TV companies,
which offer video, broadband and telecommunication services.
Nymia C. Almeida
Vice President - Senior Analyst
Corporate Finance Group
Moody's de Mexico S.A. de C.V
Alexandra S. Parker
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's de Mexico S.A. de C.V
Moody's affirms Televisa's Baa1/Aaa.mx ratings; outlook stable
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
No Related Data.
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