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Global Credit Research - 20 Oct 2010
Approximately $3.8 billion of debt instruments affected
New York, October 20, 2010 -- Moody's Investors Service assigned a B2 rating to Univision Communications,
Inc.'s (Univision) $750 million senior secured notes
due 2020, and B2 ratings to the amended and extended term loan and
revolver portion of the company's senior secured credit facility.
Univision plans to utilize the net proceeds from the note offering to
repay a portion of indebtedness outstanding under the senior secured credit
facilities. The credit facility amendment also favorably extends
the maturity of a portion of the facility by up to 2.5 years.
Univision's B3 Corporate Family Rating, B3 Probability of
Default Rating, SGL-3 speculative-grade liquidity
rating and stable rating outlook are not affected.
Following is a summary of today's rating action:
..Issuer: Univision Communications, Inc.
....Senior Secured Bank Credit Facility (Term
Loan), Assigned a B2, LGD3 - 41%
....Senior Secured Bank Credit Facility (Revolver),
Assigned a B2, LGD3 - 41%
....$750 million Senior Secured Regular
Bond/Debenture due 2020, Assigned a B2. LGD3 - 41%
The transactions improve Univision's maturity profile and reduce
the refinancing risk related to its significant 2014/2015 maturities,
although cash interest costs will increase meaningfully. Univision's
credit facility amendment extends the maturity on approximately $2.5
billion (subject to any upsize) of the remaining $6.7 billion
term loan facility (after factoring in the paydown from the note proceeds)
to March 2017 from September 2014 and the bulk of the $600 million
revolver to March 2016 to March 2014. Univision remains highly
leveraged and will continue to need access to capital markets to refinance
the revised maturity structure given projected cash generation,
but the transactions reduce the large tower in 2014 when a significant
amount of corporate debt maturities could create challenging refinancing
conditions for leveraged borrowers.
The extension of the senior secured credit facility also favorably satisfies
a material contingency (a requirement to extend at least $3.25
billion of the 2014/2015 debt maturities) to completing the previously
announced transactions with Grupo Televisa, S.A.B.
(Televisa; Baa1, stable outlook) whereby Televisa will invest
$1.2 billion in Univision and amend its Program License
Agreement (PLA) with Univision. Assuming the other contingency
(HSR regulatory approval) to the Televisa transactions is satisfied,
the refinancing of at least $3.25 billion of 2014/2015 maturities
paves the way for the extension of the term of the PLA to 2020 from 2017.
Moody's believes the PLA extension provides greater certainty regarding
Univision's cash flow generation over the next 10 years by locking
up access to Televisa's programming over that span.
The extended credit facility maturity will shorten to March 2015 if Univision
does not utilize at least $1.1 billion of the $1.2
billion to be invested by Televisa to repay by January 29, 2015
a portion of its $1.7 billion senior unsecured toggle notes
due March 2015 (2015 Toggle Notes), among other conditions.
Moody's expects Univision will exercise the call option or retire
by some other means at least $1.1 billion of the 2015 Toggle
Notes (initially callable on March 15, 2011 at 104.875) to
satisfy this condition. Assuming the transactions with Televisa
and the partial refinancing of the capital structure (including the partial
call of the 2015 notes, extension of the bulk of the revolver and
$2.5 billion of the term loan ) are completed as contemplated,
Moody's estimates that Univision would have approximately $4.8
billion of debt maturities in 2014/2015. Reducing the 2014/2015
debt maturities to $2.5 bilion or less by 2/28/14 is a condition
to extending the term of the PLA to at least 2025.
The new notes will be guaranteed by Univision's domestic operating
subsidiaries and Broadcast Media Partners Holdings, Inc.
(Univision's parent) and will be secured by a first lien on substantially
all of the assets of Univision and its subsidiaries that secure the company's
$7.2 billion senior secured credit facility (including the
extended term loan and revolver). Moody's does not anticipate that
repayment of at least $1.1 billion of the 2015 Toggle Notes
from the proceeds of the Televisa investment will affect the B2 ratings
on the senior secured first lien instruments.
Moody's ranks the credit facility, 12% notes due 2014
and the new 2020 notes the same in its loss given default notching methodology
based on the instruments' pari passu first lien senior secured claims.
The credit facility nevertheless contains covenants that could improve
recovery prospects relative to the notes.
Univision's B3 CFR reflects its strong and leading market position in
Spanish-language media within the United States and good intermediate-term
growth prospects tempered by its very high leverage, vulnerability
to cyclical advertising and high refinancing risk associated with 2014/2015
debt maturities. Growth prospects supported by Hispanic demographic
trends, as well as the market position and strong operating margins
support Univision's unlevered cash flow generation. The risk of
a restructuring of its highly leveraged balance sheet (gross debt-to-EBITDA
is approximately 13.3x LTM 6/30/10 incorporating Moody's standard
adjustments and excluding non-cash advertising revenue) nevertheless
remains elevated, particularly if economic conditions were to weaken.
A deterioration in liquidity including an inability to achieve and sustain
positive free cash flow, a decline in projected covenant cushion,
heightened concern that the 2014 maturities cannot be refinanced,
renewed economic weakness, or heightened risk of a discounted debt
repurchase or other restructuring, could result in a downgrade.
The ratings will also be vulnerable to a downgrade as long as debt-to-EBITDA
is above 10x, although a downgrade may not occur if the company
has adequate liquidity given the potential for meaningful de-levering
during economic expansions.
Good operating execution or an equity offering that leads to consistent
free cash flow generation and debt reduction after factoring in all capital
costs (including PIK interest), debt-to-EBITDA sustained
below 8.5x and free cash flow (under the assumption that all interest
is paid in cash) exceeding 3% of debt could position the company
for an upgrade. A good liquidity position including a high degree
of confidence that Univision can refinance its maturities and maintain
access to Televisa's programming would be necessary for an upgrade.
The last action was on October 6, 2010, when Moody's
changed Univision's rating outlook from negative to stable.
For additional information on Univision's ratings, please see the
credit opinion on www.moodys.com.
For the assignment of Univision's ratings, Moody's has used its
methodology for the Global Broadcast Industry, which can be found
at www.moodys.com in the Rating Methodologies sub-directory
under the Research & Ratings tab. Other methodologies and factors
that may have been considered in the process of rating Univision include
Moody's Approach to Global Standard Adjustments in the Analysis of Financial
Statements for Non- Financial Corporations - Part I,
published in February 2006, and Probability of Default Ratings and
Loss Given Default Assessments Methodology, published in June 2009,
for instrument ratings, which publications can also be found in
the Rating Methodologies sub-directory on Moody's website.
Univision, headquartered in New York, is the leading Spanish-language
media company in the United States. Annual revenue is approximately
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service's information, confidential and proprietary Moody's
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
MOODY'S adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
MOODY'S considers to be reliable including, when appropriate,
independent third-party sources. However, MOODY'S
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
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used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
John E. Puchalla
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
Alexandra S. Parker
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns B2 ratings to Univision's extended credit facility, new notes
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New York, NY 10007
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