TEXT-S&P: Starz LLC ratings unaffected by sale speculation
Dec 17 - Standard & Poor's Ratings Services said today that its ratings on Starz LLC (BB/Stable/--) are not currently affected by unconfirmed media reports that Starz is looking for a potential buyer for the business after its spin-off from Liberty Media Corp. in the first quarter of 2013. We could, however, take a rating action if further detailed media reports emerge and corroborate this. Depending on the nature of the information and the potential buyers involved, we could either place the ratings on CreditWatch with positive or negative implications. If the business is likely to be sold to a financial buyer, we will place the ratings on CreditWatch with negative implications or potentially lower the rating prior to the deal's consummation. If the business is likely to be sold to a strategic buyer (with a higher credit rating), we would place the ratings on CreditWatch with positive implications. "Liberty has not had any discussions with potential buyers of Starz," said Liberty Media president and CEO Greg Maffei. For 2013, we are expecting low- to mid-single-digit percentage revenue growth, assuming that the distribution and animation businesses begin to grow again. However, we are expecting a low-single-digit percentage decline in EBITDA due to higher investment in original programming and library content. Pro forma for the dividend distribution to Liberty Media as part of its spin-off, debt leverage was 3x as of Sept. 30, 2012. We expect that debt leverage will remain close to 3x in 2013. Recently, Netflix Inc. acquired the licensing rights to the Walt Disney Co.'s content starting with films released in 2016. In our opinion, the Disney/Netflix agreement is a credit negative for Starz over the long term. The agreement will deprive Starz of a significant portion of its live action and family movie content beginning in 2016, and could reduce its negotiation leverage in carriage agreement renewals with cable operators. We believe the agreement could push Starz to further increase its investment in original programming and may be a motivating factor behind the unconfirmed sales effort.
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