Antenna TV Assigned BB- Rtg by S&P; Outlook Positive.
Antenna owns and operates the leading television broadcasting network and program producer in Greece, with 1996 sales of Greek drachma Dr25 billion ($92 million). It is the first Greek television broadcaster to be rated by Standard & Poor's. The ratings reflect Antenna's strong position in the relatively small, but growing Greek television broadcasting market, which benefits from regulatory barriers to entry, and the company's good operating track record. These factors are tempered by Antenna's limited free cash flow generation to date, which is partly due to the capital intensive nature of its program production activities. The stable political and improving economic environment within Greece (sovereign foreign currency rating outlook revised to positive in April 1997) help support the rating and outlook.
Antenna has grown steadily since its inception in 1989. It holds the top share (37%) of television advertising revenues (television expenditures comprise a high 66% of total advertising expenditures in Greece), and has leading positions in audience share and ratings among the seven national television networks. Antenna's competitive position is boosted by its strong Greek language programming capability, which is preferred by Greek consumers. The company produces about half of the country's entire Greek language television production (excluding news programming), and over 75% of its own broadcasted programming, which gives it control over quality and costs. Antenna's strong position in local programming helps compensate for the more cyclical nature of its advertising revenues, which comprise the bulk of company revenues (87% in 1996), and provides potential to generate future revenue from program sales.
Antenna's broadcasting cash flow margin (operating income before depreciation and amortization minus current programming amortization) has grown steadily to the current 37% level (from 7% in 1992), and further growth is expected as Antenna derives more value from its growing programming library and increases the proportion of reruns in its programming mix. While such profitability trends are positive, Antenna has yet to generate significant free operating cash flow (after programming expenditures). While programming expenditures will remain significant, they will comprise a smaller part of Antenna's growing revenue base. Adjusted EBITDA (net of programming expenditures) interest cover is expected to be around 3 times in 1997. Repayment of interest and principal is subject to foreign exchange risk, as Antenna will have to service its U.S. dollar debt and foreign acquired programming from drachma-denominated cash flows.
Although the notes are unsecured, they will comprise the only debt outstanding. Standard & Poor's does not anticipate the addition of any debt that would rank senior to the notes, hence there is no notching down Antenna's issue rating from the corporate credit rating. Antenna is privately owned with management holding a 25% interest, and three other large minority shareholders. Ratings assume that any future potential minority buyout would not weaken the position of bondholders.
Although programming expenditures will remain significant, free cash flow generation is expected to improve (but still remain relatively moderate) as Antenna grows its revenue base, leverages its programming library and as capital expenditures ease. Standard & Poor's believes that Antenna will be able to cushion foreign exchange risk over the first five years of the issue through forward hedges. Provided that that free cash flow grows in line with expectations and Antenna maintains its strong competitive position in the growing Greek broadcasting market, ratings could be raised in the next few years, Standard & Poor's said. ---CreditWire
CONTACT: Kathryn E Cronin, CFA, (44) 171-826-3520
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|Date:||Aug 4, 1997|
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