Viacom Hits Debt Market With $1.3B Offering

Viacom’s about to make good on its promise to borrow cash to help pay off its existing debt — just as its owner, National Amusements, is urging it to consider a deal to merge with CBS.

The cable and film company says it will sell $1.3 billion in debt. It will consist of $400 million in senior notes due in 2022 and paying 2.25% in interest, as well as $900 million from senior notes due in 2026 and paying 3.45% in interest. The sale is expected to close on October 4.

Viacom needs $400 million to pay off senior notes due in December that pay 2.5% in interest. Another $500 million will retire senior notes due in April that pay 3.5%.

Any leftover cash from the new borrowing will be used for “general corporate purposes,” the company says.

While the interest rates on the new offerings are slightly lower than the ones being retired, they’re still relatively high — reflecting ratings agencies’ concerns about Viacom’s prospects.

Three of the leading ratings firm give Viacom the lowest investment-grade rating, putting its offerings just one step above what is considered speculative, or “junk,” status. That makes it barely acceptable for pension funds, colleges and other entities restricted to investment-grade vehicles.

Moody’s Investors Service rates Viacom debt Baa3 while S&P Global Ratings deems it BBB- (negative) and Fitch Ratings pegs it BBB (negative).

Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. LLC are serving as joint book-running managers for the offering.

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