Univision Says Liquidity Is Not a Problem

"Univision has more than ample liquidity to operate the business in the current environment, and has sufficient cash on hand to meet all obligations and debt maturities including repayment of the asset sale bridge of $350 million due in March 2009. There are no other debt maturities until the later part of 2011," the company said in a statement.

Michelle Caruso-Cabrera
General Assignment Reporter

The company's assurances came in reaction to doubts raised by a Barrons article last weekend.

In that piece Barrons' argued that Univision "has been stung by the downturn in advertising, an ominous development in view of its debt load of $10 billion, roughly 12 times annualized cash flow.

Univision's pretax cash flow is barely enough to cover its interest costs. Big media companies have been crushed in the stock market, with companies like News Corp. (Barron's parent) now valued at less than six times annual pretax cash flow. This suggests that Univision's equity has little current value, which is reflected in the battered price of the company's junior public debt: 16 cents on the dollar."

A source familiar with the company's finances disagrees with the assessment that cash flow is "barely" enough to cover interest payments.

Univision has $8.5 billion in first lien loans and another $1.5 billion in senior unsecured debt. This debt has a "payment in kind" toggle, which means if Univision can't make the payment, it can pay creditors later, but it will have to pay those creditors even more interest.

The Univision private equity deal is seen as the poster child of price/earnings excess. Many believe it marked the peak of the PE boom. In 2006, a group of private equity firms paid $11 billion or $35.25 a share, representing one of the highest multiples ever paid for a media company. The private equity partners, including billionaire Haim Saban, Madison Dearborn, Providence Equity, Texas Pacific Group, and Thomas H Lee Partners.

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