Chris,
Here is the latest on TV Guide and ACTV.
Note this sentence: <<<< TV Guide's relationship with TCI should benefit the penetration of interactive systems. >>>>>
"Friday February 19, 11:03 am Eastern Time
S&P rates TV Guide Inc proposed 144a snr sub notes
(Press release provided by Standard & Poor's)
NEW YORK, Feb 19 - Standard & Poor's today assigned its single-'B'-plus rating to TV Guide, Inc.'s proposed Rule 144A offering of $400 million senior subordinated notes due 2009.
Standard & Poor's also assigned its double-'B' corporate credit and bank loan ratings to the company.
Proceeds from the notes offering will be used to finance a portion of the acquisition of News America Publications, Inc. (publisher of TV Guide magazine) from News Corp., Ltd. by United Video Satellite Group, Inc. (UVSG), which upon completion of the transaction will be renamed TV Guide, Inc.
The outlook is stable.
Ratings reflect TV Guide's strong brand recognition and potential for increased electronic program guide subscribers and advertising, offset by concerns for declining secular trends in TV Guide's traditional publications, the lack of a track record in operating these newly combined businesses, and uncertainties regarding expansion of interactive electronic guides.
Importantly, Standard & Poor's attributes some business and financial support from 49% owner News Corp.
The ratings and outlook do not take into account the possibility of an adverse outcome of pending patent infringement litigation.
Tulsa, Okla.-based UVSG currently provides satellite-delivered video, audio, data and program promotion services to North American cable television systems and C-band satellite dish owners.
UVSG is acquiring TV Guide from News Corp. for approximately $2.6 billion, consisting of $800 million cash and approximately $1.8 billion in UVSG stock, based on current trading levels.
At the same time, UVSG is acquiring satellite program delivery service businesses from Tele-Communications, Inc.'s (TCI) Liberty Media Corp. subsidiary for stock.
Following the acquisitions, the new TV Guide, Inc. will be jointly controlled by News Corp. and Liberty Media.
TV Guide's traditional program guides, which account for more than two-thirds of pro forma earnings before interest, taxes, depreciation, and amortization (EBITDA), have experienced significant circulation and cash flow declines for several years.
TV Guide is attempting to stabilize performance by refocusing editorial content, increasing advertising, and reducing operating costs.
To leverage the TV Guide name, electronic guides from UVSG have already been renamed TV Guide. Plans are underway to significantly boost electronic guide cash flow through increased penetration, advertising cross-selling with printed guides, advertising rate increases, and overhead cost sharing with printed guides.
Interactive program guides, including internet services, are expected provide most of TV Guide's cash flow growth. These guides' success is largely dependent on the roll-out of digital set top cable boxes and the ability to attract advertisers.
TV Guide's relationship with TCI should benefit the penetration of interactive systems. Additional cash flow growth is expected from the extension of the TV Guide brand to additional programming and electronic commerce ventures.
Some concern relates to two patent infringement lawsuits involving Gemstar Development Corp., which also provides programming guides.
Consolidated restricted group pro forma EBITDA margins for the nine months ending Sep. 30, 1998 were about 25%. For the same period, giving effect to the notes, EBITDA coverage of interest was over 4.0x.
Discretionary cash flow has consistently been positive, and capital spending will be approximately $37 million in 1999.
The bank loan rating is double-'B', at the same level as the corporate credit rating.
The facility comprises a $300 million revolving facility due 2005 and a $300 million 364-day revolving/term loan due 2005.
Facilities are secured mainly by a negative pledge of ownership in, and intercompany indebtedness of, certain company subsidiaries.
Standard & Poor's simulated default scenario stressed cash flows and collateral values.
While default-scenario asset values in the form of subsidiary stock could be meaningful in a default scenario, values clearly would relate to performance of intangible media assets held by such subsidiaries.
The assets' intangible nature and dependence on penetration, subscriber renewal, and advertising could result in insufficient collateral protection to secured creditors in the event of a default caused by an advertising decline or an inability to obtain programming agreements with cable operators.
Therefore, especially in light of the large size of the facility relative to more junior debt, recovery value could fall short of covering the facility.
OUTLOOK: STABLE
Good discretionary cash flow and relatively strong credit measures for this rating level, as well as Standard & Poor's attribution of support from News Corp., will support the ratings as TV Guide rationalizes traditional businesses and undertakes new initiatives. "
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