The Nielsen Company (Luxembourg) S.à r.l., an indirect wholly owned subsidiary of ratings and data intelligence giant Nielsen, on Wednesday (1/25) proposed to issue $500 million principal amount of senior notes due 2025 in a private offering that is exempt from the registration requirements of the Securities Act of 1933.
Why the half-billion dollar debt offering?
Nielsen intends to apply the net proceeds of the offering for general corporate purposes, which could include capital expenditures, working capital and redemption or repayment of debt.
If applicable, Nielsen would also use some of the funds toward its $560 million purchase of Gracenote from Tribune Media Co.
Nielsen notes that the offering is not conditioned on consummation of the Gracenote acquisition.
The notes are being offered only to qualified institutional buyers in reliance on Rule 144A under the Securities Act and, outside the U.S, only to non-U.S. investors pursuant to Regulation S.
Moody’s Investors Service assigned a “B1” rating to the proposed $500 million senior unsecured notes, and concurrent with the rating action, Moody’s affirmed Nielsen’s Ba3 Corporate Family Rating (CFR), Ba3-PD Probability of Default Rating and SGL-1 Speculative Grade Liquidity Rating, as well as the Ba1 rating on the senior secured bank credit facilities at Nielsen Finance and B1 rating on the existing senior unsecured notes at Nielsen Finance and The Nielsen Company (Luxembourg) S.à.r.l.
The rating outlook was changed downward to “stable,” from “positive.”
In a comment released Wednesday (1/25), Moody’s said the downgrade reflects Nielsen’s increased financial leverage resulting from the incremental debt and its expectation that leverage will remain in the 4.4x-4.7x range (Moody’s adjusted) over the rating horizon.
The outlook change also reflects Gracenote’s lower EBITDA margin profile relative to Nielsen’s, which Moody’s estimates will result in an approximate 30-50 bps reduction in the combined company’s pro forma EBITDA margin (before synergies are realized).
“We believe it will take an extended time to restore credit metrics, including leverage and free cash flow ratios, to levels appropriate for consideration to a higher rating category,” Moody’s said.
In addition, Moody’s expects Nielsen to continue making investments to improve its Total Audience Measurement product to compete effectively against other players that have launched cross-platform measurement systems and “to restore customers’ confidence that its products are accurately capturing audience viewership across all screens, including the major OTT services.”
As of 2:51 p.m. Eastern on Wednesday (1/25), Nielsen shares were up 0.92%, to $41.08. It’s a small step in the right direction for a stock that has been battered in the last six months, and finished Monday’s trading at a 52-week low of $40.54.
On Oct. 25, Nielsen shares tumbled $9.28 in a single trading session after investors reacted harshly to poor Q3 results.
Why did the company see such a colossal tumble on Wall Street?
Nielsen missed many of the Street’s forecasts, reporting a 7% dip in GAAP net income, to $132 million, and diluted net income per share of 36 cents, off 5.3%. For non-GAAP results, growth was seen — adjusted net income (ANI) increased 3.1%, to $266 million. This reflects a diluted ANI per share gain of 5.7%, to 74 cents. But, that fell short of the average estimate of six analysts surveyed by Zacks Investment Research, of 76 cents per share.
Total Q3 revenue of $1.57 billion, although up from $1.53 billion in Q3 2015, also missed Street estimates. The analysts surveyed by Zacks anticipated revenue of $1.59 billion.
Additionally, the disappointing Q3 led Nielsen to make a downward adjustment of its FY16 guidance, with the company now expecting adjusted net income per share between $2.73 and $2.79 per share. That compares to a $2.87 per share consensus estimate.
