Dick Clark Prods. marketing high-yield bonds
Trying to sell $150 mil of first lien notes in junk bond marketNEW YORK -- "So You Think You Can Dance" has been a hit with reality television fans, but will junk bond investors be willing to bet on the series?
Dick Clark Prods., home to the Fox TV dance competition and awards shows like the Golden Globe Awards, will find out this week as it attempts to sell about $150 million of first lien notes in the junk bond market, the latest of a slew of companies taking advantage of growing appetite for risky debt.
Founded by "American Bandstand" creator Dick Clark, the 57-year-old company also produces the American Music Awards, Academy of Country Music Awards and "Dick Clark's New Year's Rockin' Eve."
Moody's assigned the new notes a rating of B2, the fifth-highest junk rating, citing the company's reliance on just four annual shows and the dance competition.
While the four annual events are expected to continue to attract large audiences, Moody's flagged potential risks in the longevity of the popular "So You Think You Can Dance."
"It's not as perpetual as the award shows are expected to be," Moody's analyst Neil Begley said. If ratings fall over time, "there would be some pressure for them to replace that with something else new and fresh. That's a bit more of a risk in our opinion, compared to the award shows."
A spokeswoman for Dick Clark Prods. did not have an immediate comment.
Issuance of junk bonds has picked up as falling interest rates boost demand for higher-yielding debt. Junk bonds last month rallied the most they have all year, with returns of nearly 3.5%, according to Bank of America Merrill Lynch indexes.
Proceeds of Dick Clark Prods.' new bonds will be used to repay about $51 million in bank loans and fund a $90 million distribution to the company's parent, Moody's said.
Based in Santa Monica, Dick Clark Prods. is owned by Six Flags Inc. and Red Zone Capital, the private equity firm of Washington Redskins owner Daniel Snyder. Dick Clark sold his majority stake in the company to Mosaic Media Group in 2002.
The production company also owns an extensive entertainment library, including more than 30 years of "American Bandstand" footage. Revenues are "extremely predictable," as license agreements are typically long-term, Moody's said in a statement.
"So You Think You Can Dance" was revamped for its seventh season, using a pool of dancers from previous series, after ratings dropped to 7.1 million viewers in 2009 from 9.7 million in 2008.
The show just announced a 40-city tour that will start in New Orleans on Sept. 19 and end in Glendale, Ariz., on Nov. 17.
Reuters' Jill Serjeant contributed to this report.