TEXT - S&P rates Viacom proposed snr debentures
Nov 16 - Standard & Poor's Ratings Services today assigned its 'BBB+' issue-level rating to New York City-based entertainment company Viacom Inc.'s proposed issuance of $250 million 30-year senior debentures due 2043. The company also announced an offer to exchange its 6.875% senior debentures due 2036 and its 6.750% senior debentures due 2037 for new debt in the form of the proposed 2043 debentures. The rating on these debentures will remain unchanged based on the company's proposed tack-on to these new debentures. We expect that the two transactions will have a minor positive effect on the company's credit profile. While leverage will increase by 0.1x to 2.5x, the company will modestly reduce interest expense and push out the company's sizable 2036 debt maturities. The long-term corporate credit rating on Viacom is 'BBB+' and the outlook is stable. These ratings remain unchanged. Our ratings reflect the company's well-positioned cable TV networks, strong cash flow generation and liquidity, and moderate financial policy. We regard Viacom's business risk profile as "satisfactory," based on our criteria. The company's networks enjoy strong brand franchises among younger demographics (despite competitors recently gaining viewers from Nickelodeon), extensive distribution, and pricing leverage with advertisers and multichannel service providers. The earnings volatility and low margin of Viacom's filmed entertainment business only slightly offset the generally stable performance of the cable networks. Recent double-digit percentage ratings declines for key programs on Nickelodeon could, if they don't reverse, depress cash flow generation and ultimately affect our view of the business. For the fourth quarter of fiscal 2012 (ended Sept. 30, 2012), consolidated revenues were down 17% and consolidated EBITDA was up 10% due to fewer film releases. We view the company's financial risk as "intermediate." Our stable rating outlook on the company reflects our expectation of flat EBITDA for the fiscal year ending Sept. 30, 2013. We also believe that Viacom will keep its debt to EBITDA below 2.75x, which we regard as appropriate for our 'BBB+' rating on the company. (For the latest complete corporate credit rating rationale, see Standard & Poor's research report on Viacom, published July 27, 2012, on RatingsDirect.) Related Criteria And Research -- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012 -- Use Of CreditWatch And Outlooks, Sept. 14, 2009 -- Criteria Guidelines For Recovery Ratings, Aug. 10, 2009 -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 Temporary Contact Numbers: Naveen Sarma, New York, (1) 201-835-0479; Chris Valentine, New York, (1) 646-300-4670 Ratings List Viacom Inc. Corporate credit rating BBB+/Stable/A-2 Senior $250M debentures due 2043 BBB+
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