Credit-default swap spreads on media giant Viacom widened last week amid management changes and rumors that the telecoms giant may be looking for a buyer for its radio unit, Infinity Broadcasting. Five-year credit protection on Viacom widened to around 47 basis points Wednesday, having traded as tight as 42bps the week before, according to a New York-based trader. The widening was more marked than may have ordinarily been the case due to thin liquidity as traders kicked back for the summer doldrums, he added.
A shake-up in management that saw Viacom president Mel Karmazin exit may have also affected trading on the name, said the trader. Rumors that the sale of Infinity was in the cards were considered negative because of the radio broadcaster's strong cash flows. Most trading was between dealers, he added.
Fitch Ratings rates the corporate A minus and has it on a stable outlook. Brendan Buckley, senior director in New York, said that although Karmazin's departure is a negative, his successors, Tom Freston and Leslie Moonves, have strong track records and should be able to fill the void. Viacom is performing well operationally and has solid liquidity. Short of any aggressive action by the new management the change should not affect the firm's ratings, he said.
