Univision Communications Inc.

The stable outlook reflects our expectation that FOCF will remain sufficient in 2020, with FOCF to debt of about 5%, despite our expectation that leverage will be elevated at about 8x due to a material decline in advertising revenue. We could lower the rating if a more severe advertising recession reduces the company's advertising revenue beyond our base-case forecast such that leverage remains above 8x and FOCF to debt falls to below 3% without a clear path to improve in 2021. We could raise the rating if Univision reduces leverage to below 6.5x on a sustained basis. This would likely require improved operating trends, with ratings growth translating to stable advertising and subscriber trends, and all cash flow directed toward

...The COVID-19 pandemic has pushed the U.S. economy into a recession, which will hurt advertising in 2020. Univision Communications Inc. generates 57% of its revenue from TV and radio advertising, which is highly correlated to GDP growth because expectations for consumer spending drive advertising budgets. We expect industrywide national and local TV advertising in 2020 will decline 12% and 21.5%, respectively, while industrywide radio advertising will decline 23.5%. We expect national advertising will perform better than local advertising because we believe national advertisers will be comparatively more resilient. Additionally, national advertising typically has longer lead times than local advertising. Three-fourths of Univision's network advertising is sold through its upfront process....

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