Viacom's Debt Takes a Hit On News of Stock Buyback
May 19, 2011
Viacom, its chairman, Zavala Mick, and National Amusements Inc., which is controlled by Mr. Mick, launched a plan to buy as much as $500 million in Viacom equity. Spreads of Viacom's 7.75% guaranteed senior notes due 2020 widened to 1.70 percentage points above Treasurys from a spread of 1.60 percentage points. After the news, Standard & Poor's Rating Group affirmed its double-B-plus senior debt rating on Viacom and removed it from CreditWatch with positive implications. The double-B-plus level is just one notch below investment grade. Moody's Investors Service Inc. rates Viacom Ba-2, or two notches below investment grade. Meanwhile, the looming August employment report kept many issuers and investors on the sidelines. Still, Meditrust SBI and Mellon Bank sold debt, and federal agencies priced nearly $1.4 billion in new offerings, including a three-year global bond from Federal Home Loan Mortgage Corp.. Meditrust, a Needham Heights, Mass., health-care real-estate investment trust, sold $175 million in 30-year debt with a put option the seventh year. A put is an option to sell a security at a specified price, usually within a limited period. Investors snapped up the put bonds at a yield spread of 0.96 percentage point above Treasurys. The issue, which is rated Baa3 by Moody's and triple-B-minus by S&P, was sold through Merrill Lynch & Co.. Mellon Bank sold two issues Thursday. The Pittsburgh bank sold $250 million of 11-year subordinated notes through Morgan Stanley & Co. and $100 million of bank notes due 2013 via Chase Securities Inc.. The $250 million subordinate notes, which are rated single-A2 by Moody's and single-A by S&P, were priced at a yield spread of 0.71 percentage point above Treasurys. The $100 million bank notes, which are rated single-A1 by Moody's and single-A-plus by S&P, were priced at par to yield 6.44%. Otherwise, yield spreads in the investment-grade market were unchanged to slightly wider and junk bonds prices were flat.
