Vivendi SA (VIV)’s debt rating was reaffirmed by Standard and Poor’s, which expects the group’s management will keep a lid on debt as it reviews its asset portfolio and options for a reorganization.
S&P had said in July that it may cut Vivendi’s BBB long- term rating within three months depending on the outcome of the group’s strategy review. The negative outlook on the company today reflects the possibility of a downgrade by one level within the next two years, S&P said.
The ratings agency said Vivendi’s key financial metrics are likely to deteriorate within limits allowing the company to keep its rating, the second-lowest investment grade.
“We believe that management is committed to preserving our current rating,” S&P said in an e-mailed statement. “Any large asset disposals would likely be accompanied by significant debt reduction and a material strengthening of the group’s financial risk profile.”
The cost of insuring Vivendi bonds using credit-default swaps jumped more than 2 basis points, or 1.4 percent, to 172 basis points following the statement. The price of the swaps has surged 22 percent since Sept. 19, according to Bloomberg data.
Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
A representative for the Paris-based group said this was good news for the company.
With Chairman Jean-Rene Fourtou pledging to overhaul Vivendi’s unique telecommunications-to-media structure, the group is exploring options for its assets. Fourtou has attempted finding buyers for its video-game unit Activision Blizzard Inc. (ATVI) and has hired banks to explore a sale of phone companies Maroc Telecom in Morocco and GVT in Brazil, according to people familiar with the matter.
Shares of Vivendi were unchanged at 15.77 euros at 1:12 p.m. in Paris trading.
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