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Watch Your Back

14 February 2019 by jbchevrel

UniVision (UVN) spread was wider today (5y CDS +65 cash -1/-1.5pt), as Q4 results missed, and confirmed the downtrend in revenue. The 5y CDS now pays 550bp and looks like it is at an intermediate juncture between distressed and low-beta HY names. Audience trends are worsening (especially among target Spanish-speaking people). UVN has already lost its leading position to Comcast Corp (CMCS, IG, owns NBCUniversal, which itself owns Telemundo). Another patent-related story might also weigh on UVN sentiment. Indeed, UVN may have infringed DISH patents by using its technology that adapts the quality of streaming content based on available bandwidth, without paying a license. On the positive side of things. UVN has repaid $550m debt in 2018 incl $210m in 4Q, and according to management, the plan is to continue reduce debt, using FCF, in 2019. Another way to reduce debt could be asset sales. In particular, UVN announced plans to sell English-language digital assets. Last year, those assets contributed $2m to EBITDA. This is small compared to the potential sales proceeds (up to $100m). Management explicitly committed to use sales for debt payment. Sales are still pending, though. For now, Entreprise Value (8.5x) more than covers Net Debt (7.3x), which argues for a reversal towards 400s on the 5y CDS. But in the medium term, subscription losses and M&A uncertainty could prove challenging for credit.