TEXT-S&P rates Viacom proposed $250m senior debentures 'BBB+'

Fri Nov 16, 2012 4:42pm EST

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(The following statement was released by the rating agency)
(Editor's note: In the original version of this media release, published
earlier today, the related criteria and research and ratings list sections
were inadvertently omitted. A corrected version follows.)
    
    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

RATINGS LIST

Viacom Inc.
 Corporate credit rating                    BBB+/Stable/A-2
 Senior $250M debentures due 2043           BBB+

Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.

 (New York Ratings Team)
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