Viacom's battles go beyond the box office
A potential box office flop on its hands, in the shape of underwhelming swords-and-sandals remake 'Ben Hur' is just the latest problem for media gaint Viacom.
The MTV and Comedy Central owner is grappling with a stark choice: cut dividends and sell assets or risk seeing ratings drop on its $12bn of debt.
Allowing a downgrade of its bonds, which are rated two notches above junk, would give Viacom flexibility to keep paying its dividend, but borrowing costs could be higher.
Alternativley, Viacom would consider cutting its payout to shareholders or selling shares to reduce its debt load, said a source. "From a credit perspective, any resolution to the direction of senior management for this company is a positive step," said Steve Flaherty of Neuberger Berman, which holds Viacom bonds.
"They're over their skis on their ratings, they're over their skis on their leverage, and that needs to come down."
Viacom's spokesman declined to comment. Ousted chief executive Philippe Dauman's proposal to sell a 49pc stake in Paramount could help, but controlling shareholder Sumner Redstone has resisted such a sale.
Also on the cards is a merger with CBS. (Bloomberg)