S&P recrunches numbers for PCI debt; give Bresnan a B
Standard & Poor's is reviewing the BB- corporate credit and senior debt rating it has for PCI, a wholly owned subsidiary of media group @Entertainment. The report should be ready this week, the agency said.
Announced at the end of April, the review comes just as @Entertainment struggles to recoup from failed negotiations with competitor Canal+ Polska to create a digital-television platform. (See related story, page 3).
"It's a very important piece of information we're taking into account while preparing our review," Kathryn Cronin, a debt analyst with the agency, said last week.
Standard & Poor's originally decided to examine PCI's debt because it felt the company's parent, namely @Entertainment, was overextending itself. "The company has become increasingly involved in expensive start-up ventures that could affect future funding requirements for PCI," Standard & Poor's said in late April. The agency is referring to ventures such as the $350 million @Entertainment is expected to spend to launch its own digital platform, Wizja TV.
Standard & Poor's has a more positive view of competitor Bresnan. Last week it assigned a B senior debt rating for the $120-million and DM 216 million senior discount notes Bresnan plans to issue later this year.
@Entertainment and Bresnan are stiff competitors in the cable television business here. PCI operates the country's largest cable network, Polska Telewizja Kablowa (PTK), which boasts more than 840,000 subscribers. Bresnan operates the second-largest cable company with more than 330,000 subscribers. PTK reported 1997 revenue of $38.14 million, while Bresnan pulled in $15 million.
Standard & Poor's said last week that the rating it gave to Bresnan reflected the risk the company faces as it constructs and markets cable, telephone and other services, as well as the $245 million debt load the company is carrying. "However, the ratings are supported by the company's relatively sizable cable position in a market with high growth prospects, and a potentially broadened revenue stream in the medium term as Bresnan develops its start-up telephony operations," said Juan Jose Garcia, an analyst with Standard & Poor's London office.
Last year Bresnan Communications' parent company, Bresnan International Partners, added telecom services to its existing cable network. A separate subsidiary, Telefonia Polska Zachod (TPZ), won licenses to offer telecom services in two voivodships in northern Poland - Gorzow and Szczecin. So far the company has attracted 2,000 subscribers to its telecom services and plans to reach 100,000 by the end of 1999.
But Bresnan is not alone in its telecom aspirations. @Entertainment's PTK said a few weeks ago that it was also ready to enter the business, using its more than 3,536 kilometers of fiber optic cable to carry telephone calls if it is able to obtain telecom licenses from the Communications Ministry. The ministry plans to issue telecom licenses in 18 voivodships by the end of the year, and TPZ and PTK may find themselves bidding side-by-side. Standard & Poor's originally looked at PCI in 1996 when the company issued $130-million worth of bonds. The seven-year senior notes were issued with a coupon of 9.78%.
While the breakdown in @Entertainment's talks with Canal+ over the digital television platform could negatively impact the company's credit rating, it has already taken a heavy toll on the company's stock price. Traded on the U.S.'s Nasdaq exchange, the stock has plunged 24% from $17 a share May 29 to its Wednesday price of $12.80. The news that the company may team with Canal+ had pushed the stock price up from a December 1997 low of $9 per share to a recent high of $19 April 20.
"(The drop in share price) was definitely influenced by the breakdown in negotiations," said Louis Kerner, a media equity analyst with Goldman Sachs in New York, which last year underwrote @Entertainment's $199.5 million initial public offering.
Despite the failed talks Kerner believes the two could still come together.
"There is still a good chance that the merger will go through," he said. "Negotiations of this kind are always difficult."
Goldman predicts @Entertainment's shares should hit $30 by the end of the year.
Announced at the end of April, the review comes just as @Entertainment struggles to recoup from failed negotiations with competitor Canal+ Polska to create a digital-television platform. (See related story, page 3).
"It's a very important piece of information we're taking into account while preparing our review," Kathryn Cronin, a debt analyst with the agency, said last week.
Standard & Poor's originally decided to examine PCI's debt because it felt the company's parent, namely @Entertainment, was overextending itself. "The company has become increasingly involved in expensive start-up ventures that could affect future funding requirements for PCI," Standard & Poor's said in late April. The agency is referring to ventures such as the $350 million @Entertainment is expected to spend to launch its own digital platform, Wizja TV.
Standard & Poor's has a more positive view of competitor Bresnan. Last week it assigned a B senior debt rating for the $120-million and DM 216 million senior discount notes Bresnan plans to issue later this year.
@Entertainment and Bresnan are stiff competitors in the cable television business here. PCI operates the country's largest cable network, Polska Telewizja Kablowa (PTK), which boasts more than 840,000 subscribers. Bresnan operates the second-largest cable company with more than 330,000 subscribers. PTK reported 1997 revenue of $38.14 million, while Bresnan pulled in $15 million.
Standard & Poor's said last week that the rating it gave to Bresnan reflected the risk the company faces as it constructs and markets cable, telephone and other services, as well as the $245 million debt load the company is carrying. "However, the ratings are supported by the company's relatively sizable cable position in a market with high growth prospects, and a potentially broadened revenue stream in the medium term as Bresnan develops its start-up telephony operations," said Juan Jose Garcia, an analyst with Standard & Poor's London office.
Last year Bresnan Communications' parent company, Bresnan International Partners, added telecom services to its existing cable network. A separate subsidiary, Telefonia Polska Zachod (TPZ), won licenses to offer telecom services in two voivodships in northern Poland - Gorzow and Szczecin. So far the company has attracted 2,000 subscribers to its telecom services and plans to reach 100,000 by the end of 1999.
But Bresnan is not alone in its telecom aspirations. @Entertainment's PTK said a few weeks ago that it was also ready to enter the business, using its more than 3,536 kilometers of fiber optic cable to carry telephone calls if it is able to obtain telecom licenses from the Communications Ministry. The ministry plans to issue telecom licenses in 18 voivodships by the end of the year, and TPZ and PTK may find themselves bidding side-by-side. Standard & Poor's originally looked at PCI in 1996 when the company issued $130-million worth of bonds. The seven-year senior notes were issued with a coupon of 9.78%.
While the breakdown in @Entertainment's talks with Canal+ over the digital television platform could negatively impact the company's credit rating, it has already taken a heavy toll on the company's stock price. Traded on the U.S.'s Nasdaq exchange, the stock has plunged 24% from $17 a share May 29 to its Wednesday price of $12.80. The news that the company may team with Canal+ had pushed the stock price up from a December 1997 low of $9 per share to a recent high of $19 April 20.
"(The drop in share price) was definitely influenced by the breakdown in negotiations," said Louis Kerner, a media equity analyst with Goldman Sachs in New York, which last year underwrote @Entertainment's $199.5 million initial public offering.
Despite the failed talks Kerner believes the two could still come together.
"There is still a good chance that the merger will go through," he said. "Negotiations of this kind are always difficult."
Goldman predicts @Entertainment's shares should hit $30 by the end of the year.
