Debt woes at Univision

Sam Zell isn't the only guy who took on huge amounts of debt in pursuit of a big deal. Last year's $13.7 billion acquisition of L.A.-based Univision has left the new owners, a group of big league private equity fellas that includes L.A. billionaire Haim Saban, with nearly $10 billion in outstanding debt. Second-quarter financials for the Spanish-language media giant were pretty weak – revenue was down 4.3 percent and operating income before depreciation and amortization was down 10.9 percent. As reported by Investment Dealers' Digest (through DealBook), Moody's has downgraded the company because of the so-so earnings and because Univision received less cash than expected from the sale of its music division.

When Spanish-language media giant Univision Communications was acquired by a five-member private equity consortium for $13.7 billion on March 30, 2007, the buyers paid a multiple that would be unheard of in today's market: 12 times debt-to-Ebitda. Indeed, an M&A attorney who advised on the transaction says, "The company management got an excellent deal for shareholders, but banks aren't doing those types of deals right now." Adds Heather Goodchild, a primary credit analyst who covers Univision for Standard & Poor's, "When the deal closed, and even as the bidding was going on, it looked like an extraordinary price, so our view of the valuation has not changed. It was a very high price and the debt taken on is an extremely onerous burden."

Speaking of Sam, he was on Bloomberg Television this morning talking up a possible bottom of the housing market by early next year and insisting that Tribune is in decent shape, liquidity wise. He expects the company will pay off the $593 million remaining principal balance of a $1.5 billion bank loan that's due in June 2009. “Beyond that, we don't have any real maturities that aren't covered until 2015,” he said. Well, okay, but Tribune's 4.88 percent bonds were being priced at the unhealthy level of 62 cents on the dollar, with a yield of 32.46 percent. Yow. He didn't rule out additional asset sales or newsroom cuts.