ViacomCBS Inc.'s Proposed Senior Unsecured Fixed-Rate Notes Rated 'BBB'

CHICAGO (S&P Global Ratings) March 27, 2020--S&P Global Ratings today assigned its 'BBB' issue-level rating to ViacomCBS Inc.'s proposed senior unsecured fixed-rate notes. The company plans to issue the notes in multiple tranches and expects to use the proceeds to repay upcoming maturities and for general corporate purposes.
All of our ratings on ViacomCBS Inc., including our 'BBB' long-term issuer credit rating, remain unchanged. Our rating on ViacomCBS reflects the strength of its diversified global portfolio of media and entertainment assets.
We expect the company's credit metrics (adjusted leverage was 4.0x as of Dec. 31, 2019) to improve in 2020 due to the realization of synergies from its merger and better working capital dynamics at its studio. However, due to the emergence of the coronavirus pandemic and its effect on the global economy, we are now less certain about the pace of the improvement. This is especially true because ViacomCBS derives 40% of its revenue from advertising, which is more sensitive to macroeconomic conditions.
The negative outlook already reflected our expectation that company's adjusted leverage may not decline below 3x by the end of 2020 as it works to improve its operational performance. The economic effects of the pandemic will further challenge ViacomCBS' ability to reduce its leverage because we expect the conditions in the advertising market to soften. Over the next few quarters, we will assess the operational and financial steps the company takes to reduce its leverage below 3x despite the worsening economic environment.

Additionally, we believe that ViacomCBS has sufficient liquidity sources to meet its needs even if it is unable to access the short-term capital markets for a protracted period. As of Dec. 31, 2019, the company had $632 million of cash and access to a $3.5 billion revolver. These sources of liquidity should provide it with an ample cushion to fund its working capital needs and repay its $800 million of notes maturing in early 2021.
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