Fitch Affirms Univision's IDR at 'B'; Outlook Stable

As of March 31, 2015, Univision had approximately \$10.7 billion of debt outstanding (including the subordinated convertible preferred debentures due to Grupo Televisa).

Fitch affirmed Univision's IDRs based on the company's strong operating environment. This is particularly true given the 2010 renewal of the Grupo Televisa Program Licensing Agreement (PLA) through 2025, which had been the company's largest overhang. Other strong positives include Hispanic population growth, increased advertiser interest and expected advertising revenue growth, broadcast network ratings growth, and growing retransmission revenue.

KEY RATING DRIVERS

--Positive View on Hispanic Broadcasting: Fitch has a positive view of the U.S. Hispanic broadcasting industry, given anticipated continued growth in number and spending power of the Hispanic demographic. Fitch expects Hispanic population growth to mitigate longer-term secular issues challenging the media & entertainment sector, namely, audience fragmentation and its impact on advertising revenue. While the Hispanic broadcast television audience is not immune to these pressures, Fitch expects its growing total size will offset the impact of any audience fragmentation and drive ongoing ratings strength at Univision's television properties, resulting in low to mid-single-digit top-line growth at the television segment.

--Market Dominance: Univision benefits from a premier industry position, with duopoly television and radio stations in most of the top U.S. Hispanic markets and a national overlay of broadcast and cable networks. The company's networks garner significant market share of Hispanic viewers and generate strong and stable ratings. This large and concentrated audience provides advertisers with an effective way to reach the growing U.S. Hispanic population.

--Retransmission Fees and Programming Costs: Fitch believes Univision's cost management efforts and growth in high-margin retransmission revenue will provide an offset to the rising programing investments. Fitch expects EBITDA margins levels in the 38% to 40% range in 2015. Long-term, Fitch believes positive operating leverage from top-line growth and growth in high-margin retransmission revenue will drive margin improvement.

--Competitive Threats Emerging: Recent new entrants in the Hispanic broadcast and cable network market will add to the competitive pressures. However, Univision currently has incumbent advantage and dominant market presence. Fitch expects these factors, along with Univision's pipeline of proven content from Grupo Televisa, to enable it to continue to grow amid these increasing pressures.

--Highly Levered Capital Structure: Ratings concerns center on the highly leveraged capital structure and limited free cash flow (FCF) generation relative to total debt. As of March 31, 2015, Fitch estimates pro forma total and secured leverage of 8.8x and 7.1x, respectively. Fitch expects leverage metrics to remain relatively consistent when compared to 2014 as the company will be hard pressed to offset the loss of revenues associated with World Cup in 2014. Univision has hired several banks to complete an Initial Public Offering (IPO) later this year, but has not indicated any use of proceeds. Market indications suggest the company could raise more than \$1 billion.

KEY ASSUMPTIONS

Fitch's key assumptions within the ratings include:

--2015 Television revenues are expected to be impacted by the loss of approximately \$170 million from World Cup revenues in 2014, offset somewhat by low single digit underlying revenue growth. Thereafter, revenues are expected to grow in mid-single digits until 2018, when Fitch expects revenues to be down mid-single digits as Univision does not have the Spanish language rights to the 2018 World Cup. General advertising revenue growth reflects the positive secular trends in the demographic.
--Radio is expected to experience continued revenue declines reflecting Fitch's less optimistic view relative to television given the larger secular challenges.
--Margins remain relatively flat driven by revenue growth and cost initiatives which offset programming costs growth.
--Fitch assumes a \$1 billion IPO occurs in late 2015, with net proceeds used to reduce debt.

RATING SENSITIVITIES

Positive ratings actions would coincide with Fitch's expectation that total leverage would be reduced to below 7.0x and the company would consistently generate positive FCF. Fitch expects deleveraging could occur largely through EBITDA growth, as well as modest debt reduction from FCF and any potential IPO proceeds.

Negative ratings actions could occur if weakening fundamentals led to FCF turning consistently negative which could result in liquidity issues. This would be contradictory to Fitch's constructive view on the Spanish language broadcasting industry and Univision's positioning within it, and could indicate that the company is more susceptible to secular challenges than previously anticipated.

LIQUIDITY AND DEBT STRUCTURE

Fitch regards current liquidity as adequate, particularly in light of minimal near-term maturities. Following a series of refinancing transactions, Univision has significantly reduced near-term obligations, with the next material maturity being the \$815 million in notes due 2021. At March 31, 2015, liquidity consisted of approximately \$250 million of cash, approximately \$360 million available under the \$550 million Revolving Credit Facility due 2018 (net of borrowings and letters of credit) and, \$300 million available under the \$400 million accounts receivable securitization facility (consisting of \$300 million revolver and \$100 million term facility). Fitch calculates 2014 FCF of \$141 million and latest 12 month (LTM) March 2014 FCF of \$133 million.

Total debt is largely unchanged relative to the company's Leveraged Buyout (LBO), and credit protection metrics remain weak (though slowly improving), with total leverage as of March 31, 2015 of 8.8x, secured leverage of 7.1x, and interest coverage of 2.1x. Fitch has previously stated that it believes the secured lenders, which incurred 9x senior leverage at the LBO, would be willing to re-finance Univision's business at these levels, given Univision's strong positioning in a growing segment of the media industry.

Univision recently hired bankers to undertake an IPO, expected within the next 12 - 15 months, for a small percentage of total equity. Current market expectations are for the company to raise about \$1 billion which could value Univision at \$20 billion, including debt, or 16.7x LTM March 31, 2015 EBITDA of \$1.2 billion. The \$12.1 billion March 2007 LBO valued the company at approximately 15x the March 31, 2007 LTM EBITDA of \$787 million, or 12x total leverage. This potential valuation indicates that, assuming the market is accepting of the new multiples, the sponsors' initial investments are no longer under water.

FULL LIST OF RATING ACTIONS

Fitch has affirmed the following ratings:

Univision Communications Inc.
--Long-term IDR at 'B';
--Senior secured debt at 'B+/RR3';
--Senior unsecured debt at 'CCC+/RR6'.

The Rating Outlook is Stable.