Moody's Investors Service assigned a Ba1 rating to Alliance Atlantis Communications' proposed C$500 million of senior secured credit facilities because the company is expected to have additional expenses associated with the launch of specialty television networks as well as the acquisition of additional business units. Alliance is a major Canadian production company and movie distributor, with operations in television, film, broadcasting and the Internet. W. Judson Martin, cfo, did not return calls for comment by press time.
Moody's expects the bank facility will enjoy sufficient collateral protection, but adds that if the ratio changes, the rating may be considered for a downgrade. "If Alliance does other financing and doesn't reduce the facility accordingly, the coverage could be somewhat impaired," explained Christina Padgett, analyst. "For example, if the company took out an accounts-receivable facility, it would take away assets supporting the bank loan."
Supporting the rating is the shift in advertising dollars to specialty programming, rather than being focused solely on traditional television. According to the rating, Alliance is benefiting from substantial revenue growth as advertisers recognize the need to allocate more of their dollars toward specialty television networks in order to reach the entirety of their targeted demographic. "Advertisers recognize that there's a broader market. In the past, specialty television had less advertising revenue. It's a new market that advertisers can get into," Padgett said. She added that over time the allocation of more advertising revenue towards specialty broadcasters is likely to rectify the sizable disparity between specialty television audience share and its respective revenue share. Toronto-Dominion Securities is the lead bank. A bank spokesman did not return call for comment.