S&P Boosts Outlook on Nielsen Holdings (NLSN) to Positive
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Standard & Poor's Ratings Services today revised its rating outlook on New York City-based global information and measurement company Nielsen Holdings N.V. (NYSE: NLSN) to positive from stable. At the same time, we affirmed all ratings on Nielsen, including the 'BB' corporate credit rating.
At the same time, we assigned our 'BBB-' issue-level rating and '1' recovery rating to Nielsen Finance LLC's proposed senior secured credit facilities. The facility will consist of a $575 million revolving credit facility due 2019, a $1.3 billion term loan A due 2019, a $500 million term loan B-1 facility due 2017, a $1.1 billon term loan B-2 dollar facility due 2021, and a term loan B-2 euro facility. The '1' recovery rating indicates our expectations for very high (90%-100%) recovery in the event of a payment default. Nielsen Finance LLC is a wholly owned subsidiary of Nielsen Holdings N.V.
In addition, we are assigning our 'BB' issue-level rating and '3' recovery rating to Nielsen Finance LLC's proposed senior unsecured notes due 2022. The '3' recovery rating indicates our expectations for meaningful (50%-70%) recovery for lenders in the event of a payment default.
The company will use proceeds from these proposed transactions to repay the company's existing senior secured credit facility.
The outlook revision reflects our expectation that adjusted leverage could decline to below 4x by the end of 2014. Adjusted leverage, which includes adjustments for pensions, OPEBs, operating leases, and surplus cash and includes ownership of Arbitron for only one quarter, was 4.4x as of Dec. 31, 2013 (4.1x including a full year of the Arbitron acquisition, which closed on Sept. 30, 2013). Leverage will not increase as a result of these proposed transactions. In addition, through this refinancing, the company is addressing the sizable 2016 debt maturity (about $3 billion) that had historically limited our liquidity assessment to "adequate." These maturities are now spread out over multiple years, from 2017 through 2021. As a result, we are revising our liquidity assessment to "strong."
As the leading global provider of media measurement and retail sales and market share data, Nielsen benefits from strong market positions in its two principal businesses. Nielsen's television audience measurement service is the industry standard in the U.S. and is unlikely to be displaced over our ratings horizon. We expect Nielsen's operating performance will remain stable, given that a high proportion of sales is under multiyear contracts and it has strong renewal rates (over 70% of "Watch" and "Buy" business segment revenues are recurring). We assess Nielsen's management, which includes a new CEO and CFO as of February 2014, as "fair" under our criteria. While the new CEO, Mitch Barnes, has been at Nielsen in a number of roles, he is untested in this new position.
Our "satisfactory" business risk profile reflects our view that Nielsen's strong market position could come under pressure longer term. Its superior position in the traditional TV audience measurement could become less important as audience fragmentation accelerates and smaller players develop more innovative audience measurement services. To remain competitive, Nielsen must continue to make sizable capital investments in new innovative products that measure online with mobile usage and engagement, and gain acceptance of them with ad agencies and clients. Increased competition, together with business reinvestment, could temper cash flow growth.
We view Nielsen's financial risk profile as "significant" (as per our criteria) because of our expectations that adjusted leverage will decline to below 4x by the end of 2014. Adjusted leverage was 4.4x as of Dec. 31, 2013 (includes ownership of Arbitron for only one quarter). Our adjusted leverage calculation includes adjustments for operating leases, pensions, accrued interest, and net of surplus cash. We also include restructuring and acquisition costs in our EBITDA calculation.
At the same time, we assigned our 'BBB-' issue-level rating and '1' recovery rating to Nielsen Finance LLC's proposed senior secured credit facilities. The facility will consist of a $575 million revolving credit facility due 2019, a $1.3 billion term loan A due 2019, a $500 million term loan B-1 facility due 2017, a $1.1 billon term loan B-2 dollar facility due 2021, and a term loan B-2 euro facility. The '1' recovery rating indicates our expectations for very high (90%-100%) recovery in the event of a payment default. Nielsen Finance LLC is a wholly owned subsidiary of Nielsen Holdings N.V.
In addition, we are assigning our 'BB' issue-level rating and '3' recovery rating to Nielsen Finance LLC's proposed senior unsecured notes due 2022. The '3' recovery rating indicates our expectations for meaningful (50%-70%) recovery for lenders in the event of a payment default.
The company will use proceeds from these proposed transactions to repay the company's existing senior secured credit facility.
The outlook revision reflects our expectation that adjusted leverage could decline to below 4x by the end of 2014. Adjusted leverage, which includes adjustments for pensions, OPEBs, operating leases, and surplus cash and includes ownership of Arbitron for only one quarter, was 4.4x as of Dec. 31, 2013 (4.1x including a full year of the Arbitron acquisition, which closed on Sept. 30, 2013). Leverage will not increase as a result of these proposed transactions. In addition, through this refinancing, the company is addressing the sizable 2016 debt maturity (about $3 billion) that had historically limited our liquidity assessment to "adequate." These maturities are now spread out over multiple years, from 2017 through 2021. As a result, we are revising our liquidity assessment to "strong."
As the leading global provider of media measurement and retail sales and market share data, Nielsen benefits from strong market positions in its two principal businesses. Nielsen's television audience measurement service is the industry standard in the U.S. and is unlikely to be displaced over our ratings horizon. We expect Nielsen's operating performance will remain stable, given that a high proportion of sales is under multiyear contracts and it has strong renewal rates (over 70% of "Watch" and "Buy" business segment revenues are recurring). We assess Nielsen's management, which includes a new CEO and CFO as of February 2014, as "fair" under our criteria. While the new CEO, Mitch Barnes, has been at Nielsen in a number of roles, he is untested in this new position.
Our "satisfactory" business risk profile reflects our view that Nielsen's strong market position could come under pressure longer term. Its superior position in the traditional TV audience measurement could become less important as audience fragmentation accelerates and smaller players develop more innovative audience measurement services. To remain competitive, Nielsen must continue to make sizable capital investments in new innovative products that measure online with mobile usage and engagement, and gain acceptance of them with ad agencies and clients. Increased competition, together with business reinvestment, could temper cash flow growth.
We view Nielsen's financial risk profile as "significant" (as per our criteria) because of our expectations that adjusted leverage will decline to below 4x by the end of 2014. Adjusted leverage was 4.4x as of Dec. 31, 2013 (includes ownership of Arbitron for only one quarter). Our adjusted leverage calculation includes adjustments for operating leases, pensions, accrued interest, and net of surplus cash. We also include restructuring and acquisition costs in our EBITDA calculation.
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