How will Latin American and Hispanic Companies Fare in the Current Credit Crunch?

Ongoing fallout from the credit crisis could mean tough times ahead for media companies carrying heavy debt loads.We are in for a tough 2 or 3 years,” Victor Maruri. Managing Partner, Hispania Capital Partners, tells Portada.

Is that also the case for media companies in the Spanish-speaking world? How leveraged are they? Lets take a look…
 
Univision: Not that great a scenario

Univision—the behemoth of Hispanic media—was acquired in 2006 by private equity houses  Madison Dearborn Partners, Providence Equity Partners, Texas Pacific Group and Thomas H. Lee Partners for $13.7 billion, including the assumption of $1.4 billion in debt. The purchase was done at a high leverage ratio of 14 (meaning that the acquirers put one dollar of their own capital for every 14 dollars debt they took to finance the acquisition). With the current high interest rates, and the slowdown in ad revenues, interest coverage is going to come under pressure. “Interest expense becomes a larger component of overall net income,” says Hispania Capital Partners’ Victor Maruri.
 
 
Televisa: Cash cow, low debt 
The largest Spanish-language media company in the world, Mexico’s Grupo Televisa has debt worth $2.54 billion. However, the Mexican Media Giant has a slightly higher amount than that available in cash and short-term securities, putting it on very sound financial footing (with a debt/equity ratio of less than 1). Good news that the largest Media Conglomerate in the Spanish-speaking world is not going through any “leverage hangover.”
 
 
Telemundo – Part of Largest U.S. Conglomerate
Broadcasting and digital media company Telemundo, a part of the General Electric conglomerate, recently announced layoffs. It justified the layoffs with the slowdown in ad revenues. General Electric is Telemundo’s (NBC’s) holding company. General Electric has a relatively high debt level (4/1 Debt/Equity ratio).
 
 
SBS – Spanish Broadcasting System: Stocks Falling
Spanish Broadcasting Systems , who also has important digital assets, has a relatively high debt/equity ratio of 4. The company’s stock has fallen more than 80% since last summer began. The company is taking measures to reduce expenses.
 
 
Prisa—Talking to private equity houses to reduce debt burden
Spanish media company Grupo Prisa is currently talking to different financial institutions, including U.S. private equity houses KKR and Hicks, Muse and Partners in order to reduce its large debt load (5 billion euros or $6.5 billion). Prisa’s vast holding include Spain’s largest paid daily El Pais and several TV and radio assets as well as educational book publishing group Santillana. Prisa is also a majority investor in Grupo Latino de Radio.
 
 
On Monday: A look at Impremedia, Todobebe, Batanga, QuePasa, McClatchy and Belo. 

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Editorial Staff

Portada Staff

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