Loans backing audiovisual sporting events firm Imagina Media Audiovisual fell this week amid downgrades from S&P Global Ratings, Moody's and Fitch into the CCC+/Caa1/CCC+ category and the group's failure to make a €170 million payment to the French professional football league this month.
The firm's B1 and B2 term loans were broadly quoted around 84.5/86.5 today and yesterday after popping to 87.125/89.125 on Oct. 20, from 85.5/87 last week, according to loan pricing from IHS Markit. The loans were quoted in the low 90s at the start of October.
Both S&P Global Ratings and Moody's today downgraded the firm's parent, Joye Media, with S&P Global Ratings taking it to 'CCC+' from 'B-', with a negative outlook, while Moody's downgraded it to Caa1, from B3, also with a negative outlook. Fitch Ratings downgraded Invictus Media, the debt issuing entity of Imagina, to 'CCC+' from 'B'.
The agencies cited revenue decline, liquidity pressure and uncertainty surrounding the group's French subsidiary Mediapro Sports France (MSF).
MSF reportedly missed a €172 million installment due in early October to the French football league Ligue de Football Professionnel, or LFP, for the rights to broadcast 10 League 1 games and eight League 2 games in exclusivity per week. MSF reportedly believes that the pandemic has significantly lowered the value of the rights. This is because of action taken by the French authorities that led to the canceling of the 2019/20 season and created uncertainty over programming for the 2020/21 season.
All three agencies comment that this presents potential legal risks that Joye Media could incur for not complying with its contract and this could severely hurt the viability of its French operation and put pressure on future cash flow.
S&P Global Ratings added the company has an unsustainable capital structure, given its high level of debt relative to its weak free operating cash flow. “With the injection of €50 million of new equity and €60 million of new debt, the company was able to partly restore its cash position and alleviate some short-term risks. This capital increase added to the €147 million of cash reported as of June 2020,” S&P Global Ratings said.
“The downgrade reflects the downside risks to Imagina's credit quality following the missed payment to the French Football League and the difficulty to profitably monetize the French football rights with the current subscriber base," says Víctor García Capdevila, Moody's lead analyst for Joye.
The firm's capital structure consists of a €300 million secured first-lien term loan A due in 2024, a €380 million amortizing secured term loan B due in 2025 and a €60 million fully drawn revolving credit facility due in 2024, issued by Invictus Media and Imagina. The firm also has outstanding a €180 million secured second-lien facility due in 2025.
Imagina's debt stems from loans allocated in June 2018 that backed Oriental Hontai's acquisition of a majority stake in the firm.
Imagina produces and distributes audiovisual content, administers and distributes sporting events, produces and supplies film and interactive content, and provides post-production services in Europe.