Moody's Upgrades Rating on $6 Billion in CBS Corp. Debt

11:18 AM PST 08/22/2011 by Georg Szalai
Walter McBride/Landov

"Increased free cash flow generation, absolute debt reduction of over $2 billion, stronger liquidity and increasing contractual revenue sources provide the company more financial flexibility," the debt ratings agency said.

NEW YORK - Credit ratings agency Moody's Investors Service on Monday upgraded the debt ratings on approximately $6 billion in CBS Corp. debt - less than a week after mentioning a review that could lead to such a move.

Higher debt ratings make borrowing cheaper. Moody's review focused on senior unsecured long-term debt and so-called commercial paper, or short-term borrowing.

"Increased free cash flow generation, absolute debt reduction of over $2 billion, stronger liquidity and increasing contractual revenue sources provide the company more financial flexibility, which will allow management to manage its credit metrics, to fund shareholder returns with free cash flow and strike a balance between debt repayment and share repurchases depending on the company's performance," explained Neil Begley, senior vp at Moody's.

CBS Corp., led by president and CEO Leslie Moonves, has added new revenue streams, such as retransmission consent fees and money from digital distributors like Netflix, to diversify its business, which has traditionally been more advertising-dependent.

Moody's on Monday had a mixed outlook for the entertainment company next year. "We anticipate the company will continue its growth trajectory into 2012, driven by significant political advertising due to the presidential primary and election as well as heavy number of congressional, state and local races, continued benefits from the strong upfront completed earlier this year, and the 2012 Olympics in London, where CBS has a large presence in the outdoor advertising market and television ad demand is expected to pressure pricing," the credit ratings firm said.

"Moody's does recognize that there are increasing economic headwinds which will likely mitigate some or all of those bi-annual cycle gains in 2012," it added though.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai

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