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I AGREE
01 Jun 2015
New York, June 01, 2015 -- Moody's Investors Service assigned a Baa1 rating to the proposed USD 325
million senior unsecured notes due 2025 to be issued by Globo Comunicação
e Participações S.A.'s ("Globo").
Proceeds will be used to replace Globo's existing USD 325 million
6.25% perpetual notes. The ratings outlook is stable.
As part of the refinancing of Globo's existing USD 325 million 6.25%
perpetual notes, Globo will transfer to Pontis III Ltd. (not
rated), a Cayman Islands-based special purpose vehicle,
the option to purchase all of the outstanding Globo's USD 325 million
perpetual notes on July 20, 2015. At the same time,
Pontis III Ltd. will issue senior secured exchangeable notes ("SENs")
to be mandatorily exchanged for the new Globo's USD 325 million senior
unsecured notes due 2025. The gross proceeds of the SENs will be
deposited in an escrow account pledged to the SENs trustee on behalf of
the holders and will be released on the call exercise date.
The issuance is part of Globo's liability management with the objective
of reducing the cost of its debt, and will not affect its leverage
metrics since the proposed issuance will replace the existing USD 325
million perpetual notes in its entirety.
The rating of the proposed notes assumes that the issuance will be successfully
completed as planned and replace Globo's existing USD 325 million perpetual
notes, and that the final transaction documents will not be materially
different from draft legal documentation reviewed by Moody's to date and
assume that these agreements are legally valid, binding and enforceable.
Rating assigned:
Issuer: Globo Comunicação e Participações
S.A.
USD 325 million Senior unsecured notes due 2025: Baa1
The company's existing ratings are unchanged:
Issuer: Globo Comunicação e Participações
S.A.
LT Issuer Rating: Baa1
USD 200 million 5.307% senior unsecured notes due 2022:
Baa1
USD 300 million 4.875% senior unsecured notes due 2022:
Baa1
USD 325 million 6.25% senior unsecured perpetual notes:
Baa1
The outlook for all ratings is Stable
RATINGS RATIONALE
Globo's Baa1 ratings are supported by its leading market position in the
Brazilian TV broadcasting market with 37% of the overall average
national audience share and 42% during prime time, in the
last twelve months ended in March 2015. The rating also recognizes
Globo's demonstrated progress in diversifying away from advertising revenues
into the higher margin content and programming segment that reached 34%
of revenues in March 2015. Moreover, while the Brazilian
media advertising expenditures reached BRL 33.5 billion in 2014,
4.1% above 2013, advertising expenditures for broadcast
TV increased 8.1% over the same period, to BRL 23.2
billion, accounting for 69.1% of the total media advertising
market. Globo's high quality content with 92% of its prime
time programming produced in-house is an additional credit positive.
Globo's Baa1 rating ranks one-notch above Brazil's government bond
rating of Baa2, which is granted only on exceptional basis for issuers
with fundamentals that are much stronger than the sovereign. In
the case of Globo this is evidenced by its exceptionally strong credit
metrics, ample liquidity and a foreign-exchange exposure
that is managed through hedges and mitigated by revenues generated outside
of Brazil that are sufficient to service its near-term debt servicing
obligations. These factors outweigh Globo's close links with the
Brazilian economy.
The main factors constraining Globo's ratings are Brazil's government
bond rating at Baa2, the company's concentration of revenues
in the cyclical Brazilian TV advertising market, with a degree of
foreign exchange exposure, as well as the company's high fixed cost
base, stemming from its high quality programming strategy,
and competition that pressures its margins. The company's improved,
but still evolving corporate governance and lack of independent board
members are also factors constraining Globo's rating.
The issuance is part of Globo's liability management with the objective
of reducing the cost of its debt, and will not affect its leverage
metrics since the proposed issuance will replace the existing USD 325
million perpetual notes in its entirety.
Globo has a solid liquidity position supported by its total cash of BRL
7.4 billion in the end of March 2015, a small increase from
BRL 7.2 billion in December 2014, but still less than BRL
8.6 billion of cash reported in December 2013, mainly due
to BRL 2.8 billion in dividend payments in the LTM ended March
2015. Despite the decrease, Globo's cash position still more
than covers its total adjusted debt of BRL 2.9 billion.
The company has a very comfortable debt maturity profile with no major
maturities until 2022, when USD 500 million comes due, and
its remaining USD 325 million of debt are related to the proposed notes
due 2025 that will replace the existing perpetual notes.
Most of Globo's indebtedness is denominated in foreign currencies,
mainly USD, exposing the company to foreign currency fluctuations.
Accordingly, the company hedges at least its next 12-month
foreign currency exposure and its main debt maturities are due in 2022
and onwards, which mitigates cash impacts. In a stress scenario
considering an exchange rate of BRL/USD of 4.0, the highest
achieved since the creation of the Brazilian Real and representing a devaluation
of almost 25% from the March 2015 value, the company's leverage
would increase to around 0.7x. This ratio would still be
commensurate with Globo's Baa1 rating.
The stable outlook on Globo's Baa1 rating reflects our view that Globo's
credit metrics will remain strong for the rating category and that management
is comfortable with the current low leverage and high cash balance.
We also believe that Globo will benefit from increased advertising spend
associated with the 2016 Olympic Games that will be held in Brazil.
An upgrade on Globo's rating would depend on an upgrade of Brazil's government
bond rating and on the maintenance of strong credit metrics, liquidity
and market positioning. A gap of more than one notch with the current
Baa2 rating is unlikely.
Conversely, negative pressure could arise should Brazil's sovereign
rating be downgraded or the Brazilian economy and TV advertising market
experience a greater than expected downturn that causes Globo's leverage
to increase to above 1.0 time or EBITDA margin to fall below 15%,
or FCF turn negative for an extended period of time due to excessive cash
dividends payout. We also expect Globo to maintain cash well in
excess of debt. A material debt-financed acquisition could
also cause a negative movement in Globo's current rating or outlook.
The principal methodology used in this rating was the Global Broadcast
and Advertising Related Industries published in May 2012. Please
see the Credit Policy page on www.moodys.com for a copy
of this methodology.
Headquartered in Rio de Janeiro and owned by the Marinho Family,
Globo is Brazil's largest media group and leading broadcast TV network
with BRL 16.2 billion (equivalent to USD 6.9 billion) in
net revenues in 2014. Globo has other business activities including
pay-TV production and programming, sound-recording,
magazine publishing, internet businesses engaged through its subsidiaries,
as well as interests in Brazil's leading satellite direct-to-home,
Sky Brasil (unrated) and cable TV operator, Net Servicos (unrated).
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Marcos Schmidt
Vice President - Senior Analyst
Corporate Finance Group
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 800-891-2518
SUBSCRIBERS: 55-11-3043-7300
Marianna Fernandes Rodrigues Waltz
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 800-891-2518
SUBSCRIBERS: 55-11-3043-7300
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's assigns Baa1 rating to Globo's USD 325 million proposed notes; outlook stable
No Related Data.
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