Jan 17 - Standard & Poor's Ratings Services said today that its 'BBB' rating
and stable outlook on CBS Corp. are not affected by the company's
announcement that it has begun the process of converting the Outdoor Americas
division into a real estate investment trust (REIT). In addition, the company
will pursue a sale of the outdoor division in Europe and Asia. As of Sept. 30,
2012, debt leverage (including our adjustments for capitalized operating leases
and minimum franchise payments associated with the outdoor advertising business,
receivable securitization debt, tax-effected unfunded pension and retiree
medical obligations, and net of a $24 million decrease in the carrying value of
debt resulting from the settlement of fair value hedges) was 2.6x.
We believe the sale of the lower-margin international outdoor operations would
not materially affect consolidated leverage, and could even lead to a modest
improvement in leverage due to the onerous minimum guarantees associated with
the London Underground contract, which we believe has been a drag on
profitability. In addition, we would expect a reduction in our operating lease
adjustment, which currently adds roughly $2.78 billion to debt in 2012 and
roughly 0.7x to leverage.
We view the conversion of the Americas division to a REIT as a possible first
step in the potential sale or spin-off of this segment. While such a potential
action would reduce the company's reliance on cyclical advertising revenue, we
view outdoor advertising as having more favorable structural prospects
compared with some of the company's other advertising based segments, notably
radio. Still, our preliminary view is that a potential sale or spin-off of
Americas Outdoor would not lead to a revision of our current "satisfactory"
business risk profile assessment.