MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has affirmed TV Azteca, S.A.B. de CV's (TV Azteca) ratings as follows:
--Long-term Issuer Default Rating (IDR) at 'BB-';
--Local currency IDR at 'BB-';
--USD300 million Senior Notes due 2018 'BB-'.
The Rating Outlook is Stable.
TV Azteca's ratings reflect its business position as the second largest TV broadcaster in Mexico with national presence and one of the largest Spanish speaking TV companies worldwide. The ratings consider the company's financial profile and strong cash generation, which in turn has been used in past years to finance growth, pay dividends, capital reductions and share repurchases. TV Azteca's ratings are limited by the mature stage of the industry, high competition from traditional and new distribution platforms, limited revenue diversification base, as well as the company's debt structure and financial flexibility.
TV Azteca's business position reflects its stable market share in the domestic market. Mexico's TV broadcasting market is comprised of two national networks (Grupo Televisa, S.A.B. and TV Azteca) and smaller regional and local broadcasters. Television continues to be the most important mass media in Mexico for advertisers. The company's revenues are supported in the attractiveness of its internally produced content which allows it to align advertisers with specific demographics.
Traditionally, advertisers with presence in broadcasted TV in Mexico are engaged in less cyclical segments such as consumer goods and services, which in turn have been translated into stable cash flows during economic cycles. During 2011, TV Azteca's revenues grew 3% versus 2010, compared to a national GDP growth of 4%. This increase reflects TV Azteca's market share gains during the year, and improved economic conditions.
TV Azteca's profitability has remained strong reflecting higher and stable audience ratings, which in turn have translated into better pricing (price linked to rating points) and management's strict cost and expenses control. Costs and expenses have remained relatively stable at 51 - 52% and 11 - 11.6% of revenues, respectively. As a result, EBITDA Margin was 39.8% in 2011, slightly below 40.9% in 2010 and 41.4% at year-end 2009. Considering the adoption of IFRS reporting standards, for the three months ended on March 31, 2012 the company's EBITDA Margin (operating income plus depreciation and amortization) was 28.8%, similar to 28.2% in the same period of the previous year on a comparable basis.
In recent years internally generated cash has been the company's main source to finance growth and cash distributions to shareholders. The company's strategy continues to be focused in the production of robust programming which requires investment in talent and facilities. For 2012 capex and other investments related mostly to exhibition rights would be in the range of approximately USD50 million and dividend payments of approximately USD26 million, which Fitch sees manageable for the company's forecasted cash generation and that those levels will remain relatively stable in the near future. Historically, the company has supported its liquidity requirements with uncommitted short-term credit facilities.
TV Azteca's financial profile is strong for the rating category and has been stable in recent years. Total Debt to EBITDA for 2011 was 2.4 times (x) compared to 2.0 x, 2.2x and 2.5x at year-end 2010, 2009 and 2008, respectively. For the same periods, Interest expense covered by EBITDA was 5.0x, compared to 4.8x, 4.4x and 3.9x. For the LTM at March 2012 leverage was 2.2x and Interest Coverage 4.7x. Liquidity risk is low with total debt as of March 31, 2012 of MXN10.8 billion, Short Term debt of MXN595 million and Cash of MXN8.2 billion. TV Azteca's debt is comprised of structured Certificados Bursatiles with an outstanding balance of MXN5.4 billion which started its amortization in 2011 through 2020, USD300 million in Senior Notes issued in 2011 equivalent to MXN3.9 billion and MXP1.5 billion (USD120 million) financing with American Tower Corp. maturing in 2020 with an option to be extended until 2069. The company's financial flexibility is limited by its restricted access to debt markets (banks and capital markets).
While liquidity risk is low and the company's debt maturity profile is adequate, it is important to remark that approximately 50% of the company's total debt as of March 31, 2012 is secured by 22% of national advertising revenues, which is senior to all debt instruments.
Factors that could lead to a positive rating action include a combination of: additional profitable business lines contributing to positive cash flow generation, consistent lower leverage through the cycle, sustained increase in market share that would lead to higher cash generation allowing the company to reduce working capital needs. Conversely, negative factors that could affect the company's credit profile are: declining market share, results and profitability; increased leverage; size, form and rollout of future investments; higher than expected cash distributions to shareholders.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 12, 2011).
Applicable Criteria and Related Research:
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229
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