Latest / Bloomberg Intelligence / Bloomberg's Orr on Viacom Debt, Nizza on Nigel Farage (Audio)

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Bloomberg's Orr on Viacom Debt, Nizza on Nigel Farage (Audio) · Bloomberg Intelligence

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  Speaker 1: I'm Charlie Peloton. That's a Bloomberg business flash. You're listening
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  Speaker 1: to taking stoff with Kathleen Hayes and Pim Fox on
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  Speaker 1: Bloomberg Radio and up next on Bloomberg Radio, it's Viacom.
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  Speaker 1: The gift that keeps on giving could be an entertainment
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  Speaker 1: story in and of itself, just the moves at this company.
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  Speaker 1: But today Emma or our corporate finance reporter at Bloomberg News,
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  Speaker 1: is going to talk a little bit about a potential
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  Speaker 1: twelve billion dollar down grade. What's going on here, Emma, Hey, Alex.
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  Speaker 1: Uh So, with their legal troubles behind them, the next
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  Speaker 1: big challenge via Common is facing is their twelve billion
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  Speaker 1: dollars of debt, which is yielding higher than the investment
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  Speaker 1: grade rating it currently has, closer to junk levels. Um,
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  Speaker 1: they're on negative watch from the ratings agencies. Uh So,
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  Speaker 1: they basically are faced with a choice. They have to
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  Speaker 1: either accept a down grade or take some pretty drastic
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  Speaker 1: measures like cutting their dividend um raising equity financing or
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  Speaker 1: potentially the sale of Paramount or a merger with CBS Corp.
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  Speaker 1: To d lever and decrease that debt so keep satiating
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  Speaker 1: those uh dividend receivers, or kind of figure out some
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  Speaker 1: structural changes. What are the kind of pros and cons
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  Speaker 1: and on either side of this decision here, I mean
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  Speaker 1: it's it's a complicated situation. You know, obviously the equity
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  Speaker 1: holders would love to be receiving those dividends. On the
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  Speaker 1: other hand, UM Viacom is paying a much higher dividend
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  Speaker 1: at three point eight percent than the SMP average or
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  Speaker 1: than their sister company cbs UM. There's also, you know,
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  Speaker 1: been talk that if they are to cut that dividend,
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  Speaker 1: they'll have more cash to reinvest in their networks, which
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  Speaker 1: have been struggling. So UM that would be another perk there.
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  Speaker 1: Decreasing that debt level would give them more flexibility in
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  Speaker 1: other areas. So in terms of all of this executive
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  Speaker 1: turnover that we've seen at Viacom, OUSTID CEO Philip Dalmont
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  Speaker 1: has proposed a sale of the stake in paramount. How
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  Speaker 1: how is that playing into this whole situation here? You know,
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  Speaker 1: that would help them de lever It would decrease that
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  Speaker 1: amount of debt, give them more capital. Delman thinks that
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  Speaker 1: it could raise as much as four billion dollars for
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  Speaker 1: the company and that would in theory help protect the
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  Speaker 1: investment grade rate. Yes, absolutely, if that were to happen,
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  Speaker 1: then they would have a lot more flexibility in terms
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  Speaker 1: of being able to keep the dividend other things, UM
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  Speaker 1: avoid you know, having to raise equity. UM. However, controlling
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  Speaker 1: shareholders Sumner and Sherry Redstone are opposed to that deal.
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  Speaker 1: Uh So it's unclear if that's really even a possibility
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  Speaker 1: that's on the table. UM. That A lot of that
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  Speaker 1: hinges on whether Dmon is able to convince the new board. Now,
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  Speaker 1: Emma Mario Gabelli, who was a Viacom shareholder, he was
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  Speaker 1: speaking on Bloomberg Television on Monday, and he opposes selling
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  Speaker 1: the entire studio. Correct. And so would Philippe Balman actually
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  Speaker 1: profit personally by this sale? I don't believe so. Okay,
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  Speaker 1: but he has until September in order to gain the
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  Speaker 1: board's approval for paramount sale. That's right, And what he's
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  Speaker 1: looking to gain approval for is a sale of a
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  Speaker 1: partial stake of forty percent. The company actually included UM
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  Speaker 1: in a recent filing of by law saying that he
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  Speaker 1: could not pursue a full sale of paramount. When you
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  Speaker 1: look at from your side in the debt world, what
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  Speaker 1: are debt investors betting are going to happen here? I
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  Speaker 1: mean the bonds are up a lot this year. Actually,
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  Speaker 1: they've performed since the legal uh settlement. I think the
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  Speaker 1: second best of similar rated bonds in terms of total returns. UM.
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  Speaker 1: So it seems like investors are betting that they will
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  Speaker 1: take the necessary steps to keep that investment grade rating,
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  Speaker 1: and that is what I've heard from analysts. UM. It
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  Speaker 1: seems in this case that both equity and debt analysts
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  Speaker 1: are kind of aligned in what they would like the
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  Speaker 1: company to do, which is to take those steps to
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  Speaker 1: keep that investment grade rating. H you think it's going
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  Speaker 1: to turn into a Ben Her movie remake. That's a
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  Speaker 1: Paramount movie. It is, it is, and it's not estimated
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  Speaker 1: million at the box office. Yeah, that none of their
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  Speaker 1: films in the past year have been doing so well.
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  Speaker 1: Paramount has really kind of been a money sucking operation
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  Speaker 1: in the past year. UM. I think people are hoping,
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  Speaker 1: you know, that with a good film or two that
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  Speaker 1: could turn around, but it has not contributed to profit
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  Speaker 1: ord which seems like an issue of if it's a
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  Speaker 1: money sucking organization and to retire this debt, if via
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  Speaker 1: convert take out that option, they basically have little cash
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  Speaker 1: left to do anything else. According to OURBC Capital analysts.
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  Speaker 1: So it seems like they're they're in quite the spot here, right, Yeah,
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  Speaker 1: and a lot hinges on, you know, the decisions that
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  Speaker 1: this new board makes. So um, it seems like the
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  Speaker 1: company really, you know, is sort of in a paralyzed state,
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  Speaker 1: waiting for the board to come in and essentially decide
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  Speaker 1: how they want to deal with this debt, if they
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  Speaker 1: want to deal with this debt, or if they would
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  Speaker 1: rather accept that ratings cut and you know, continue you
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  Speaker 1: pursuing things like paying that dividend. Now, the Viacom shareholders
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  Speaker 1: are kind of divided because there are multiple classes of stock.
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  Speaker 1: Can you tell us what are the multiple classes? And
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  Speaker 1: do they each receive the same dividend? Uh? They do not. Um.
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  Speaker 1: The Class B shaleholders are the ones that received that
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  Speaker 1: three point eight percent dividend, right, and this dividend, even
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  Speaker 1: if it was cut, what would it save him about
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  Speaker 1: six million a year? About six million? Yeah? Um? And
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  Speaker 1: you know, debt investors I think are hoping that money
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  Speaker 1: would be used to pay down maturities. Um. They do
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  Speaker 1: have enough free cash flow to pay down all of
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  Speaker 1: their maturities in the coming twelve months. So um, this
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  Speaker 1: would be more of a long term solution, you know,
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  Speaker 1: addressing that dad that comes in incoming years, and Viacom
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  Speaker 1: also has its own governance issues that it's dealing with.
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  Speaker 1: Is there any spillover from the fight in the boardroom
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  Speaker 1: to the fight over whether these asset sales will take
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  Speaker 1: place or a dividend cut will be enacted in order
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  Speaker 1: to shore up their debt payment facilities. I don't think
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  Speaker 1: there's spillover so much as that the company um is
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  Speaker 1: kind of waiting until the board decides the next steps
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  Speaker 1: they want to take. It seems like they're kind of
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  Speaker 1: dependent on the decisions the board makes, so a lot
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  Speaker 1: hinges on, you know, the changes that are coming in
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  Speaker 1: governance and how that plays out. I'm just curious. Philippe
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  Speaker 1: Doman is no longer the correct president and chief executive Viacom,
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  Speaker 1: right right? Um? Yeah, So why does he have until
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  Speaker 1: September to be involved in any of these decisions? I mean,
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  Speaker 1: I think he was really pushing for that sale, and
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  Speaker 1: I think that as part of the legal settlement, he
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  Speaker 1: asked that he had that opportunity. Um. It seems that
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  Speaker 1: he feels very strongly that that's the right choice the
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  Speaker 1: company takes, so they've given him you know, the chance
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  Speaker 1: to to pitch that to the board and too hopefully
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  Speaker 1: convinced them. Do we know? Do we know what Sherry Redstone,
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  Speaker 1: who is currently the vice chairman of the of the board,
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  Speaker 1: she along with Sumner Redstone, does not seem to be
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  Speaker 1: on board. Um they have. They have opposed the sale.
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  Speaker 1: It's unclear to what extent they fully opposed the actual
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  Speaker 1: sale and to what extent it's that they oppose. You know,
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  Speaker 1: Philip Dolman as a sort of lame duck CEO making
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  Speaker 1: that decision. So you know, right now, I think it's
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  Speaker 1: it's in a stage where he's trying to convince the
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  Speaker 1: Redstones that this is the right move, and I think
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  Speaker 1: it's anyone's guests how that will play out. Well, we
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  Speaker 1: know we're going to turn to you for more details
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  Speaker 1: when if it does get resolved. Viacom shares the b
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  Speaker 1: shares down twenty three cents right now forty one forty
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  Speaker 1: seven cents. The shares are basically unchanged so far this year.
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  Speaker 1: Let's turn our attention now to the world of politics.
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  Speaker 1: I want to bring in Mike Nietz. He is our
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  Speaker 1: executive editor for Bloomberg of politics and Mike Uh. The
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  Speaker 1: Trump campaign is holding a rally of fifteen thousand Republicans supporters.
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  Speaker 1: It will be held at the in Jacksonville, Mississippi. It's
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  Speaker 1: taking place tonight and there's gonna be a special guest
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  Speaker 1: appearing with Donald Trump. Who is it? Well that uh
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  Speaker 1: the this is like the greatest rumor of the day. Uh.
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  Speaker 1: Nigel faradge uh, the famous Brexit UH leader in Britain,
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  Speaker 1: has said he told a Daily Telegraph in Britain that
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  Speaker 1: he would be at the rally speaking on the same
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  Speaker 1: platform as Donald Trump. We haven't been able to cook
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  Speaker 1: for him that anywhere else today. Of that's a lot
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  Speaker 1: of people. But with the new leadership of the Trump
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  Speaker 1: campaign taking over, with including Steve Bannon, who is the
• 9:39
  Speaker 1: who is a great supporter of faradges Um, it seems
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  Speaker 1: like it could just happen. What are the kind of
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  Speaker 1: ideological parallels here between these two characters. So so if
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  Speaker 1: you if you remember a few days ago, Donald Trump
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  Speaker 1: treated they're gonna they're gonna be calling me Mr Brexit, right,
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  Speaker 1: and it kind of came out of nowhere and everyone
• 9:59
  Speaker 1: was like, what does he talking about? And it's part
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  Speaker 1: of it is uh is this uh this outsider populist
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  Speaker 1: movement of people who who don't like the uh, you
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  Speaker 1: know what elites have set up, including you know, trade
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  Speaker 1: deals that that they view is unfair, and you know,
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  Speaker 1: declining manufacturing jobs, those kinds of things, and UH Trump
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  Speaker 1: and Steve ben and UH both see this, see this
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  Speaker 1: not only as a movement that happens in and Britain,
• 10:26
  Speaker 1: but also in the US and across Europe. I want
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  Speaker 1: to thank you very much for telling us, and I
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  Speaker 1: guess we'll just have to see what happens if indeed
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  Speaker 1: Nigel Farage, the head of the UK Party, shows up
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  Speaker 1: in Jacksonville, Mississippi, with those fifteen thousand Republicans. Mike Nizza
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  Speaker 1: is executive editor for Bloomberg Politics. You can follow him
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  Speaker 1: on Twitter at Mike Nitze. This is taking Stock. I'm
• 10:55
  Speaker 1: pim Fox. My co host Alex Barrinka coming up on
• 10:59
  Speaker 1: taking Stock. We're gonna be talking about what to do
• 11:03
  Speaker 1: with your money when it comes to investing in commodities.
• 11:07
  Speaker 1: We're going to talk about glen Core's earnings. They dropped
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  Speaker 1: sixty six percent. That's next