When Spanish-language broadcasting giant Univision Communications Inc. was sold for $13.7 billion three years ago, the highly leveraged deal was, in the words of one veteran banker, "priced for perfection."
Given the $10 billion in debt the buyers were assuming, the slightest hiccup in the company's financial performance would have a cascading, negative effect.
The buyers, a consortium of investors including entertainment mogul Haim Saban, were counting on several factors to justify the steep purchase price: The nation's exploding Latino population and the popularity of Spanish-language programming, coupled with the promise of robust advertising growth. They expected to hold the assets for a few years and then sell them at a tidy profit.
One thing the buyers have learned: It's not a perfect world.
In the two years since the buyout, the economy has collapsed, dragging down advertising to media companies. Adding to the economic distress, Univision, owner of KMEX-TV Channel 34 in Los Angeles, has been mired in a costly legal battle with its primary programming partner.
The big payday for Univision's owners, which include a group of well-heeled private equity firms, seems further away and far less certain. So instead of riding a high wave to easy profits, Univision executives have been working furiously to dig Univision out of its hole.
During the last year, the broadcaster has written down assets by $5.3 billion, and some industry insiders now believe the nation's largest Spanish-language media company is worth closer to $9 billion -- slightly less than what it owes.
"This is about survival," said Sean Mathis, a partner at New Centurion Capital Partners, a New York investment bank that specializes in restructurings, but is not involved with Univision. "They have to service all of this debt that they put on the company, and they are not generating the cash flow they need."
In recent months, Univision has been busy putting out fires on multiple fronts to shore up its finances and to protect its programming pipeline.
In January, it settled a nagging lawsuit brought by its longtime programming partner, Grupo Televisa of Mexico, which had threatened to strip Univision of its most popular and profitable shows. The resolution guaranteed Univision the right to broadcast Televisa's hugely popular soap operas, including "Cuidado con el Angel," through 2017.
