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Moody's Upgrades Debt Ratings on U.K.'s ITV

Adam Crozier – P 2013
Getty Images
ITV CEO Adam Crozier

"The company has continued to successfully increase its total non-net advertising related revenues," says analyst Christian Azzi in lauding "the success of ITV Studios."

LONDON – Moody's Investors Service on Friday upgraded its debt ratings on U.K. TV giant ITV, citing its continued focus on new revenue streams that make it less dependent on advertising revenue.

The upgrade makes the debt ratings investment grade. Among other things, Moody's lauded "the success of ITV Studios," which the company, led by CEO Adam Crozier, has been growing by acquiring U.S. and other production firms.

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Better debt ratings make it easier for companies to borrow money and do so under favorable financial terms.

"We have upgraded ITV's rating [from Ba1] to Baa3 primarily because the company has continued to successfully increase its total non-net advertising-related revenues, by 23 percent since 2012, as a proportion of its total external revenues, while also reducing its leverage," said Moody's analyst Christian Azzi. "The upgrade also reflects our expectation that ITV's high-quality content will continue to support the company's share of advertising and share of viewing."

The debt ratings outlook is stable, the credit ratings agency said. But it also warned: "Any deviation from ITV's historically prudent financial management (including aggressive M&A, which is not incorporated into the assumptions) would exert pressure on the ratings."

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Moody's predicted that the U.K. advertising market would remain stable in 2013.

Discussing ITV Studios, the firm said: "In addition to balancing revenue volatility, ITV's content production activities are likely to drive growth in 2013 and 2014. This is because demand for content remains high as traditional broadcasters and new digital platforms (e.g. Netflix) compete to maintain and attract a bigger share of a fragmented viewership."

Overall, "ITV's liquidity profile is very good, as the company's cash generation continues to benefit from the business' cost rationalization programs and low capital expenditure requirements," Moody's concluded.

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai