Univision prepares for lean stretch
Univision Communications Inc. said Monday that it probably would trim expenses as the Spanish-language media giant grappled with a worsening economy and a mountain of debt.
“Univision, like every broadcaster, is going to be taking a very hard look at all of its expenses,” Chief Financial Officer Andrew Hobson told analysts during a conference call Monday to discuss the company’s third-quarter results.
“We are preparing for a pretty tough recessionary environment,” he said.
Hobson also warned that, despite strong television ratings, Univision’s fourth-quarter results would be “substantially worse” than those produced during the first half of the year. However, Hobson said it was premature to identify areas within the company that might be targeted for cuts because those decisions had not been made.
For the quarter that ended Sept. 30, Univision posted a $2.9-billion net loss, the result of a $3.7-billion write-down to reflect the diminished value of its core television and radio assets as well as its struggling online operation.
Revenue fell 2.4% for the quarter to $511.3 million compared with $524 million during the same period a year ago. The company does not release per-share results because its stock is not publicly traded.
Univision, like all media companies, has been pinched by a dramatic slowdown in advertising spending. Univision’s television and radio divisions took in about 25% less auto advertising in the third quarter compared with last year, Hobson said. Auto spending accounts for about 15% of the company’s TV ad revenue and 10% of its radio ad revenue.
Declining revenue compounds Univision’s challenges in meeting its debt obligations.
Last year, a group of private investors, including Los Angeles billionaire Haim Saban, took Univision private in a $12.3-billion leveraged buyout that saddled the company with more than $10 billion in debt. Since then, the economic climate has deteriorated, credit markets have seized up and sales of Univision assets, including its music labels, have been slow or have not generated as much money as Univision had anticipated.
“The high leverage constrains financial flexibility to manage a deep advertising downturn,” Moody’s Investors Service said in a recent report on Univision’s debt.
In addition to making interest payments on its bonds, Univision by the end of March must pay off the $385-million balance on a “bridge” loan that was supposed to be retired quickly through asset sales after the new owners took over the company.
Univision anticipates that it will be able to pay off the loan, Hobson said, noting that the company had more than $700 million in cash and short-term investments as of Oct. 31.
However, that’s not Univision’s only worry. The outcome of a federal trial, expected to get underway in January in Los Angeles, could disrupt Univision’s steady supply of programming.
Univision relies heavily on the popular telenovelas produced by Grupo Televisa of Mexico to drive ratings and revenue. Televisa sued Univision three years ago in a bid to terminate their long-term agreement that requires Televisa to provide its shows exclusively to Univision in the U.S. until December 2017.
“If Televisa were to stop providing us programming for any reason, it could be difficult to develop or acquire replacement programming of comparable quality,” Univision noted in a regulatory filing late last week. Univision spent nearly $5 million during the third quarter preparing for the trial and in payments it made under protest to Televisa.
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