TV Azteca May Face Downgrade in Probes

TV Azteca, Mexico’s second-biggest broadcaster, may be downgraded by Standard & Poor’s after regulators opened probes into loan transactions by its owner, Ricardo Salinas Pliego, the rating company said Monday.

S&P; cut the outlook on TV Azteca’s B-plus credit rating to negative from stable, saying investors may lose confidence in the Mexico City-based company amid investigations by U.S. and Mexican regulators. The inquiries focus on transactions made with debt owed by Unefon, a wireless unit controlled by Salinas Pliego through TV Azteca, to its equipment vendor Nortel Networks Corp.

The rating change may make it more difficult for TV Azteca to refinance its $872 million of debt, S&P; said. Including debt owed by its owner, Azteca Holdings, TV Azteca has four bonds outstanding worth $704 million, according to Bloomberg data. TV Azteca has said it has financing to repay a $125-million bond that comes due next month.

An erosion in investor confidence “could diminish TV Azteca’s access to the capital markets and bank financing, thus heightening the company’s refinancing risk, particularly the 2005 maturing debt of its parent company, Azteca Holdings,” Jose Coballasi, an S&P; analyst, said.

Rupert Brandt, who helps manage $1 billion of Latin American equities, including TV Azteca shares, at London-based F&C; Management, said he believes the company generates enough cash to keep up debt payments.

TV Azteca rating is four levels below investment grade. Its controlling owner Azteca Holdings is rated CCC-plus, or seven levels below. TV Azteca had $635 million of debt as of Sept. 30, S&P; said. Azteca Holdings’ $237 million of debt also is considered TV Azteca debt, S&P; said.

In the transactions, Nortel sold the vendor debt to a company owned by Salinas Pliego, at a 67% discount, for $107 million. About three months later, Unefon paid Salinas Pliego’s company, Codisco Investments, the loan’s full value of $325 million, according to TV Azteca, which owns Unefon.

That repayment made Salinas Pliego and Moises Saba, his partner in Unefon and Codisco, a $218-million gain. Salinas didn’t disclose his role in the debt repayments to investors.

TV Azteca spokesman Daniel McCosh didn’t return telephone messages seeking comment.