Two weeks ago, Univision bought itself breathing room by refinancing $500 million in debt, pushing back the due date by three years to 2014. The extension means that Univision no longer has to worry about burning through its cash within the next two years.
And during the last few months, Univision achieved one of its highest priorities -- getting cable and satellite TV operators to pay the company to carry its programming. The agreements with Time Warner Cable Inc., DirecTV Corp., AT&T Inc. and others should bring Univision $175 million this year, and as much as $350 million annually by 2014.
The cable subscriber fees helps Univision diversify its revenue and, for now, make up for the decline in ad revenue.
Univision's chief financial officer, Andrew Hobson, said the company's actions during the last six months had put it on a stronger footing and should allow it to weather other economic storms.
"Our balance sheet is now bulletproof for even the most draconian scenarios," Hobson said. "We don't feel that we have covenant risks or liquidity risks for at least another five years."
Still, credit rating agencies worry that Univision could default on its loans that total $9.7 billion.
"This clears the runway a little bit for them, but we still have concerns about their liquidity and their ability to make their debt amortization payments," said Standard & Poor's credit analyst Michael Altberg, who acknowledged that Univision had bolstered its position. "Before their credit amendment, they didn't have that much of a cushion."
Barclays Capital debt analyst Andrew Finkelstein said Univision executives did "exactly what they needed to do for now."
But Univision's challenge in the next few years, he said, will be to increase revenue -- a difficult task during an economic recession.
"So now it's clear sailing for them until 2014, which should give them enough time to grow their business and cash flows and make their balance sheet work," Finkelstein said. Nonetheless, he said Univision must "show growth in their business" to support its capital structure.
Univision's predicament is not all that unusual for a company sold in a leveraged buyout at the top of the market.
In 2006, Univision's then-controlling shareholder, billionaire A. Jerrold Perenchio, orchestrated a bidding war for the company. The Spanish-language broadcaster had been showing dramatic growth, along with the Latino population. Univision's upside seemed unlimited.
