Moody’s drops Viacom debt to Baa3

Moody's Investors Service said it downgraded Viacom Inc.'s senior unsecured long-term debt ratings to Baa3 from Baa2 and its short term commercial paper rating to Prime-3 from Prime-2 following the company's announcement that it plans to access debt capital markets in the near-term to improve liquidity.

The outlook is stable.

Moody’s said the action reflects the continued weaker-than-anticipated rebound in the company's operating performance and cash flow contributions, and the expectation for higher near-term adjusted leverage, which is well beyond levels commensurate with a Baa2 senior unsecured rating.

Viacom's leverage has risen well above the 3.25 times sustained leverage threshold for the Baa2 rating, leaving no room for additional debt or for operational setbacks under the company's ratings, the agency added.

However, as said in its credit focus report dated Aug. 1, Moody's would not take an action on the company's credit ratings until the corporate governance issues were resolved and near-term strategic decisions are announced such that future financial and operating strategies became more clear.

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