Fitch Rates Univision's Sr. Unsecured Notes 'CCC/RR6'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned a 'CCC/RR6' rating to Univision Communications' (Univision) 10-year senior unsecured note offering. Fitch currently has a 'B' Issuer Default Rating (IDR) for Univision. The Rating Outlook is Stable.

Fitch expects the proceeds of the issuance will be used to fund the recently announced tender of up to $460 million of the 9.75%/10.50% Senior paid-in-kind (PIK) toggle notes due 2015. Pro forma for the tender, there will be approximately $1.3 billion of 2015 PIK notes remaining.

This issuance and tender is another in a series of transactions that the company has undertaken in the wake of the extension of its Program License Agreement PLA with Grupo Televisa to 2025 from 2017. The PLA extension strengthened Univision's future operating prospects, providing improved access to the capital markets and a willingness to lend past 2017. This has and should continue to enable Univision to improve its capital structure and best position itself to address its bank debt maturities over the next several years. Univision recently extended the maturity of $5.7 billion of its secured bank debt to March 2017 from September 2014 and $409 million of its Revolving Credit Facility (RCF) to March 2016 from March 2014. Additionally, the company issued $750 million of secured debt in October, which it used to repay a portion of the bank debt. The company will also use $1.1 billion of the cash proceeds received from Grupo Televisa to repay the PIK notes (the Televisa transaction is expected to close in the first half of 2011). Subsequently, there will be less than $200 million of PIK notes outstanding, which Fitch expects the company will be able to address with free cash flow prior to or at the 2015 maturity.

While the company previously faced over $4 billion of maturities in 2014, these transactions have reduced this amount to $1.7 billion, which Fitch believes the company will be able to address with a combination of bond issuance and free cash flow. The significant maturity wall is now in 2017, providing a much larger cushion for Univision to strengthen its operating and credit profile.

Fitch believes that the private equity owners and the secured lenders remain motivated to facilitate Univision's long-term viability, as refinancing an improved operating and credit profile will provide more value than bankruptcy/debt restructuring. Underpinning this position is Fitch's view that the company will be able to delever to a range of 7 times (x) to 9x total leverage or 5x-7x on a secured basis by the 2017 maturity.

The ratings incorporate Fitch's favorable outlook on the U.S. Hispanic broadcasting industry, given expectations for continued growth in size and spending power of this demographic. Univision benefits from a leading market position, with duopoly television and radio stations in most of the top Hispanic markets, and a national overlay of broadcast and cable networks. Fitch expects mid-single-digit revenue growth (excluding largely pass-through World Cup revenue) and low/mid-teens EBITDA growth in 2010, driven by an improvement in advertising revenue, growth in high-margin retransmission fees, and the positive operating leverage embedded in the broadcasting business. Fitch's positive view extends through the intermediate term, and as a result Univision's capital structure is expected to further improve over the next several years.

Fitch regards current liquidity as adequate, particularly in light of minimal near-term maturities. At Sept. 30, 2010 liquidity consisted of $328 million of cash and $120 million available under the $300 million accounts receivable (A/R) securitization facility, of which $45 million expires in March 2012 and $255 million expires in December 2013. Fitch believes that amortization and cash interest expense will be easily covered by internal cash generation. Fitch expects the company to return to cash-pay on the PIK note stub subsequent to the partial repayment with the Televisa proceeds. Fitch expects that going forward, annual free cash flow should approximate $300 million, a significant improvement from recent years. Higher borrowing costs on the extended term loan and RCF will increase cash interest expense; however, the repayment of most of the PIK notes and expected cash-pay will be a partial offset in later years. Fitch anticipates that free cash flow will be used primarily for debt reduction.

Fitch estimates that pro forma for all of the previously announced transactions, which occurred subsequent to the end of the company's fiscal third quarter 2010, Univision had total debt of $10.4 billion, which consisted primarily of:

--$6.6 billion senior secured term loan facility, (including the delayed draw term loan), $1.1 billion of which is due September 2014 and $5.5 billion which is due March 2017;

--$577 million outstanding under the RCF, of which $54 million is due March 2014, $409 million is due March 2016, and $137 million was termed out to March 2017;

--$514 million accreted value ($545 million face value) 12% senior secured notes due July 2014;

--Approximately $200 million 9.75%/10.5% PIK senior unsecured notes due March 2015;

--$750 million 7.875% senior secured notes due 2020;

--$1.2 billion convertible debentures issued to Grupo Televisa, due 2025;

--The newly issued unsecured notes;

--$180 million outstanding under the A/R securitization facility, due December 2013.

Fitch's existing ratings for Univision are as follows:

--Issuer Default Rating (IDR) 'B';

--Senior secured 'B+/RR3';

--Senior unsecured 'CCC/RR6'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 16, 2010);

--'Recovery Ratings and Notching Criteria for Nonfinancial Corporate Issuers' (Nov. 24, 2009);

--'Impact of Receivables Securitization on the Recovery Ratings of LBO Debt Issues' (Aug. 26, 2008);

--'Liquidity Considerations for Corporate Issuers' (June 12, 2007).

Applicable Criteria and Related Research:

Liquidity Considerations for Corporate Issuers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=328666

Recovery Ratings and Notching Criteria for Nonfinancial Corporate Issuers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=489006

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=546646

Impact of Receivables Securitisation on the Recovery Ratings of LBO Debt Issues

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=398066

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