S&P Revises Assessment of Viacom's (VIAB) Management and Governance to 'Fair'; Outlook Remains Stable

S&P Global Ratings said it revised its assessment of Viacom Inc.'s (Nasdaq: VIAB) management and governance to fair from satisfactory. At the same time, we affirmed our ratings on Viacom, including the 'BBB-' corporate credit rating. The outlook remains stable.

"In our opinion, by litigating against the Redstone Trust trustees, the company's most senior management representative and a director are not serving and fulfilling their obligations to all of the company's stakeholders," said S&P Global Ratings credit analyst Naveen Sarma.

This negative assessment of the company's management culture also impacts our assessment of board effectiveness, especially as that relates to the board's independent members, whose oversight function in this situation does not, in our opinion, appear to have been adequately exercised. Whatever the merits of the lawsuit (or defenses to it) this situation in our view arises from a long dysfunctional relationship between the key litigants especially as that relates to coherent succession planning by the Viacom board of directors.

We will continue to monitor the litigation and its effect on the company's operational and financial performance. This could lead to a reassessment of our leverage threshold for the 'BBB-' corporate credit rating. Our current downside threshold for the 'BBB-' rating is 3.25x. Viacom's adjusted leverage as of March 31, 2016, was 3.4x though we expect the company's leverage to decline to below 3.25x in the next year.

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