Debt-heavy Univision survives the punches, at least for now

On one side of the auction was Televisa and investor companies, including Cascade Investment, Microsoft Corp. founder Bill Gates' asset management firm. On the other was Saban, who has made a fortune owning the Mighty Morphin Power Rangers and, later, through selling a stake in the Fox Family cable channel to Walt Disney Co. He was joined by private equity firms Providence Equity Partners, Madison Dearborn Partners, Thomas H. Lee Partners and Texas Pacific Group.

To claim the prize, the Saban group agreed to pony up $12.3 billion as well as assume $1.4 billion in existing debt.

The four private equity firms each contributed about $900 million, and Saban chipped in $300 million.

Bank loans made up the remaining $10 billion needed to take the company private.

Saban, now chairman of Univision, declined to comment for this article.

The buyers figured they could drive up the value of Univision for a quick sale, within five years, by improving areas of the company that they felt had been insufficiently mined: requiring cable and satellite TV operators to pay for carriage of Univision's two broadcast networks, and raising the prices charged to advertisers for commercial time.

Then the recession hit and ad rates fell.

"Univision had been raising its rates for many years," said Hector Orci, co-chairman of Los Angeles advertising firm La Agencia de Orci & Asociados. "They thought they would continue with business as usual, but now business as usual has become minus 5%."

So instead of taking in more ad revenue, Univision's owners saw the collapse of the auto industry, one of television's biggest advertisers.

Retailers and banks, also major buyers of radio and TV commercials, sputtered too. In 2009's first quarter, Univision's revenue skidded 12% to $410.3 million.

"We think we've hit bottom there. Now we see a more stable environment," said Joe Uva, Univision's chief executive. "As the economy starts to improve, we are poised to take advantage of that."

But media veterans speculate that Univision would be hard pressed to refinance its loans again -- not to mention selling the company -- if it waits until 2014, when the bulk of the debt must be repaid.

By that time, the broadcaster will have only three years remaining on its programming agreement with Televisa, which expires at the end of 2017.

Few buyers would be willing to pay a premium for a company that could suddenly be without its most important source of programming.