Univision

Nothing in the document should be construed as investing advice.  It is presented here to give listeners to radio information about who owns the country’s radio stations and a general indication of their financial condition as it relates to the current financial problems in the U.S. economy.

Univision  (Website) is a diversified media company that operates a large network of Spanish language TV (about 40)  and radio (about 75) stations within the United States (including Puerto Rico).   About 70% of Univision’s audience is recent Mexican immigrants, about 10% Puerto Rican, 10% Cuban Americans, and 10% from other Spanish speaking countries.

Univision operates the Univision and Telefutura TV networks, along with the cable-only channel Galavision.  Univision also owns a 10% minority interest in Entravision, another media company that targets Spanish speaking people living in the United States.     About half of people 18-49 years old who self-identify as Hispanic who are watching TV are watching one of Univision’s TV channels.

The focus of this article is Univision’s radio operations, but it helps to see the bigger picture.

History

The roots of Univision go back to 1961, when the first UHF Spanish language TV station in the United States went on the air in San Antonio, Texas (which just happens to also be the town where Clear Channel is located).   The Spanish International Network (as it was known then) was 25% owned by a TV company from Venezuela, and 25% by a TV company in Mexico.  In 1986, the FCC ruled that SIN was in violation of the law prohibiting foreign ownership and control of US TV stations and forced the licenses to be sold to an American Company.   The company was transferred to the control of  Hallmark – the folks who sell greeting cards and had the Hallmark Channel on Cable TV.   SIN was renamed Univision.

During the Hallmark era, the company produced about half of Univision’s TV programming in the United States – but the high cost of the debt Hallmark used to buy Univision made the venture unprofitable and the company failed.  In 1992, Hallmark  went bankrupt and the network was sold to a group led by A. Jerrold Perenchio.

Mr Perenchio is a Hollywood agent, and had worked closely with Norman Lear on All in the Family, Maude and Different Strokes.   He launched the career of Elton John.  He promoted the Ali-Frazier fight.  He organized the “Battle of the Sexes” Tennis match between Billie Jean King and Bobby Riggs in 1973.  You’ve probably never heard his name before, but he played a major role in what you think about the United States culture.

Mr Prenenchio does not speak Spanish.   He is a very large Republican Campaign contributor and was one of John McCain’s 2008 Presidential co-directors of Finance.

In 1996, Univision launched an IPO and a portion of the company became publicly traded.  The stock was offered at $23 a share.

In 2003, Univision acquired Hispanic Broadcasting Corporation, which operated a network of Spanish language radio stations.   Univision Radio is the made up of the the stations from that acquisition.

Hispanic Broadcasting’s roots go back to 1997, when Tichenor Media Systems and Heftel Broadcasting Corporation merged.

Tichenor Media Systems  is the family company of  McHenry Tichenor, Sr, who  died of natural causes in January 2009.    The Dallas Morning News had a nice writeup on his life [here].

Tichnor Media was run by Warren W. Tichenor, major campaign donor to President George W. Bush and he has served as U.S. Ambassador to the United Nations (European Office in Geneva) since 2006. Mr Tichenor also operated a Private Equity firm In San Antonio, Texas.

Heftel Broadcasting was owned by Clear Channel prior to being merged with Tichenor Broadcasting [in 1997].   Heftel Broadcasting’s CEO was  McHenry T. Tichenor, Jr.      McHenry Tichenor, Jr. stayed on to run Univision Radio until 2004.

Univision was “taken private” in 2007 – one of the participants in the private equity buyout is Thomas H Lee Capital, the same firm involved with Clear Channel and Cumulus Media Partner’s privatization transactions.  Because they are now a Private company, they are no longer required to file SEC reports, but continue to do so voluntarily.

The parent company is called Broadcast Media Partners (which should not be confused with Border Media Partners – another firm funded by Private Equity Capital that also targets the Mexican immigrant community).

Major Stations

Univision Radio operates in markets with high concentrations of its target Hispanic audience, so conventional “Top 25” Markets is not really applicable.

Many of the stations carry one of company’s syndicated formats:

  • Radio Cadena – News/Talk
  • La Kalle  (The Party?)
  • La  Que Buena (the Good Stuff)
  • Recuerdo  (Memories / Oldies)
  • La Neuva  (The New Suff)
  • La Tremenda  (The Big One)

New York

WADO-AM  (news/talk)
WCAA-FM  (La Kalle)
WQBU-FM (La Que Buena)

Los Angeles

KTNQ-AM  (News/Talk)
KLVE-FM   (Romantica)
KRCD-FM (Recuerdo)
KSCA-FM  (La Nueva)
KRCV FM (Recuerdo)

Chicago

WOJO-FM  (La Que Buena)
WRTO-AM ( La Tremenda)
WPPN-FM ( Pasión) [Romantica]
WVIX-FM  (La Kalle) [Joliet]
WVIV-FM (La Kalle) [Highland Park]

San Francisco / San Jose / Santa Cruz, CA

KLOK-AM (News/Talk)
KBRG-FM (Recuerdo)
KSOL-FM ( Estéreo Sol)
KVVF-FM (La Kalle)
KSQL-FM (Estéreo Sol)
KVVZ-FM  (La Kalle)

Dallas / Fort Worth

KDXX-FM (Estereo Latino)
KESS-FM (La Que Buena)
KLNO-FM (Recuerdo)
KFLC-AM ( La Voz del Pueblo – The Voice of the City/People)
KFZO-FM ( La Kalle)

Houston, TX

KLAT-AM  (La Tremenda)
KAMA-FM  (Tu Musica) “Your Music”
KLTN-FM (Estéreo Latino)
KOVE-FM (Recuerdo)
KPTY-FM (Party)

Miami, FL

WAQI-AM (Radio Mambí)
WQBA-AM (La Voz de Miami – “The Voice of Miami”)
WAMR-FM (Amor) [Romantica]
WRTO-FM (la Kalle)

Puerto Rico
(Similar to Hawaii, P.R. has simulcasts to cover the entire island)

WUKQ-AM  (WKAQ)
WKAQ-AM (WKAQ)
WYEL-AM (WKAQ)

WUKQ-FM (KQ 105)
WKAQ-FM  (KQ 105)

Phoenix, Arizona

KHOT-FM (La Nueva)
KHOV-FM (La Nueva)
KQMR-FM  (Recuerdo)
KKMR FM  (Recuerdo)
KOMR-FM  (Recuerdo)

San Diego, CA

KLNV-FM (La Nueva)
KLQV-FM (Recuerdo)

San Antonio, TX

KBBT-FM  (The Beat)
KROM-FM (Estéreo Latino)
KVWG-FM  (Country – not listed on Univision Web Site – LMA?)
KXTN-FM (Tejano – Bilingual border music)
KGSX-FM (95X – Tu Musica)
KCOR-AM (La Primera – “The First, #1”)
KLTO-FM (Rock)

Las Vegas, NV

KISF-FM (La Nueva)
KRGT-FM (Recuerdo)
KLSQ-AM  (Radio Variedades)

Austin, TX

KLQB-FM (La Que Buena)
KHZS-FM (“Hitz”)
KHCK FM (La Que Buena)

McAllen, TX  (McAllen is located on Mexican border)

KBTQ-FM (Recuerdo)
KGBT-AM (La Tremenda)
KGBT-FM (Solamente Exitos – “Just the Best”)

Fresno, CA

KOND-FM (Que Onda-
KLLE-FM ( La Kalle)
KRDA-FM (Recuerdo)

Albuquerque, NM

KIOT-FM (Coyote)
KJFA-FM  (La Jefa
KKSS-FM (KISS)
KKRG-FM (Recuerdo)

El Paso, TX

KAMA-AM  (News Talk)
KQBU-AM (Que Buena)
KQBU-FM (Que Buena)

Ownership

Univision is a private corporation.

Univision has 1,000 shares of stock outstanding, which are held by the parent company Broadcast Media Partners Holdings, Inc.

Grupo Televisa – a TV company in Mexico – which owned 11% of Univision and supplied 36% of Univision’s TV programming, has been in a disputes with Univision for some time (resolved? in January 2009 – three days after President Obama took office.  Univision caved to Televisa’s demands.  That’s probably a coincidence).

Some intemperate things were said during the competition between Televia and the Equity Capital firms at the time of this privatization transaction strongly implying that non-Hispanic interests were “taking over” the Hispanic TV network  – Mr. Saban holds interest in Israel’s TV network and Phone Company.   There were threats that Grupo Televisa might start a rival Spanish language TV network if they lost the bid to take control of Univision, or start a partnership with other American owned TV networks.

Televisa was controlled by Mexican Billionaire Emilio Azcarraga Milmo, who died in 1997.  “The Tiger” was a large supporter of the P.R.I. political party, which dominated politics in Mexico for decades.  His TV monopoly blatantly supported the PRI and used its facilities to support the PRI candidates.   [NY Times Obit].   On his death, his 28 year old son make it clear that he doesn’t have the ability or desire to follow in his father’s footsteps.  The settlement with Televisa requires Univision to give Televisa about $600 million in free advertising over the next 9 years in exchange for the programming that Televisa provides.

The partners in the privatization and current owners of Broadcast Media Partners are:

  • Saban Capital Group
    (Haim Saban CEO)
  • Madison Dearborn Partners,
    (Chicago based Private Equity firm full of Harvard Business MBAs)
  • Providence Equity Partners,
    (Providence RI P/E firm, also owns parts of Warner Music and Newport TV (formerly Clear Channel TV) – another P/E firm filled with Harvard MBAs)
  • Texas Pacific Group
    Fort Worth, TX global P/E firm – along with Bain Capital, the owner of Burger King
    Along with Providence Media (above) and Sony, acquired control of MGM
  • Thomas H. Lee Partners
    Boston based P/E firm with major investment in Clear Channel

SCG owns about 7% of the company, with the other 4 Private Equity firms owning about 22% each, with the remainder being held by officers of the company.

The privatization transaction was done with “Financial Advisors” Credit Suisse,  Deutsche Bank, Bank of America, Lehman Brothers [now in bankruptcy], and Wachovia – which probably means those banks were the source of the funds, directly or indirectly.

Management

The CEO of Univision is Joe Uva.  M. Uva became CEO following the 2007 privatization.  Prior to joining Univision, he had worked for OMD Worldwide.  OMD is a Madison Avenue company that does “Brand Building” and marketing campaigns.  You could read the OMD web site for half an hour and still have no idea what business they are in.  It’s full of Dilbertish obfuscated jargon – creating synergy between ideas and people to maximize human potential and interaction to scientifically and systematically stimulate interest in a diverse group of global initiatives, etc….   Prior to working for OMD, he worked for Turner Broadcasting Sales, negotiating with advertising clients for Ted Turner’s company.

Mr. Uva has no experience in managing or operating Radio or TV stations, and does not speak Spanish.  He comes from an Italian family in suburban New York City.   His total compensation for 2008 was about $3.2 million

The President and COO is Ray Rodriguez.  Rodriguez acquired that job in 2005.  He has worked for Univision since 1990.  He was born in Cuba, and his family lives in Miami.  He is a CPA and prior to working for Univision, he was the business manager of entertainer Julio Iglesias.  Mr. Rodriquez received compensation of about $2.6 million in 2008, and $21.1 million in 2007.

Andrew Hobson is Sr. EVP and CFO.  He acquired the title of CFO in 2005 when Jeffrey Hinson left to go found Border Media Partners.  Mr. Hobson earned $3.8 million in 2008, and $19.1 million in 2007.

Other than Joe Uva, most of the members of the Board of Directors of Univision are partners from the Private Equity Firms that acquired the company in 2007 – the typical Harvard Business school MBA types who think the media business is about leveraging discounted cash flows.  Outside directors are Henry Cisneros (familiar name?) and entertainer Gloria Estafan.

Henry Cisneros was the Secretary of HUD during the Clinton Administration, until he was forced to resign and plead guilty to charges he lied to the FBI about payments to his mistress.   Prior to going to Washington DC, Cisneros had served on the City Council and later became Mayor of the city of San Antonio, Texas (which just happens to coincidentally be the location of the headquarters of Clear Channel).   Cisneros had served as President of Univision after leaving pubic “service”, and also joined the board of Countrywide Financial and KB Homes, at the same time running his own company CityView which arranges funding for real estate developers like KB Homes.

Financial Condition as of March 31, 2009 (10-Q)

Key Balance Sheet Items – Total Company, not just radio:

Total Assets:  $10,681 Million

  • Value of Radio/TV Station licenses:  $2,743 Million
  • Goodwill and other intangible Assets:  $4,886 Million
  • Cash:  $473 Million
  • Accounts Receivable: $130 Million
  • Land, Buildings, Equipment (net) $620 Million

Debt:

  • Current Liabilities:  $371 million
  • Long Term Debt:  $10,179 Million

Stockholder Equity:  -$1,537 Million

Credit Facility / Long term Debt

The company has a $750 million  credit facility – the interest rate is pegged to the Deutsche Bank’s prime rate, which suggests who funds the facility.  $715  million is currently borrowed against the facility.    The remainder of the facility has been used as collateral for letters of credit.  The credit facility is maxed out.

The company has a $7 billion term loan facility, also tied to the Deutsche bank prime rate, which it has maxed out.  This money currently is costing 7%.

The company has a $450 million senior term draw loan (senior in front of bond holders).  The proceeds of this loan were used to buy up pre-privatization bonds owed by the company.  The entire $450 million is outstanding.

The company has $1.5 billion in fixed rate bonds at about 10% due in 2015.   Univision is choosing to not pay the interest on these bonds, but issuing “PIK” debt instruments which will pay the interest at maturity.

The company has $514 million in 7.85% loans that come due in 2011.

Univision had a $200+ million decrease in Accounts Receivable in early 2009 – the reason was not some big customer like G.M. suddenly decided to pay their bills – Univision’s owners transferred  the accounts receivable to an “off balance sheet” subsidiary to raise cash.  GE Capital (TARP Recipient!) is the company managing that $250M credit facility from some “third party”.   Can we say “Tim Geithner/Toxic Asset”?   Interestingly, GE owns NBC Telemundo – the largest Spanish language TV competitor of Univision.

The Accounts Receivable fund is being held in what is called a “Bankruptcy Remote Subsidiary”.   A “Bankruptcy Remote” subsidiary is set up to protect its assets from other parts of the corporation.  That’s pretty clearly something GE Capital did to protect itself in the event of a  Univision Bankruptcy.   They (we?) would still own the accounts receivable they advanced the money for, and keep it beyond the reach of other creditors of Univision.  (Sounds a bit like Chrysler where Geithner steps in and places the US Treasury first in line before existing bondholders, no?)  The Accounts Receivable Facility carries LIBOR+4.5%, with a LIBOR minimum of 3%.

Swap transactions

Univision has entered into a $7 Billion interest rate swap, covering the entire $7 billion in their LIBOR based credit facility – the company receives LIBOR and pays a fixed rate.  If the counterparty doesn’t fail, this effectively turns the LIBOR interest loan into a fixed cost loan… but that’s a huge “IF”.   Should the counterparty fail, Univision will lose the hedge, and be required to pay the full terms of the LIBOR rate.  [See the blog post – the ticking LIBOR bomb] – plus the term of the Credit Swap is only until October 2009 ($2B) and April 2010 ($5B).   There is no assurance that the company will be able to continue to hedge their $7 billion LIBOR loan on the same terms in the future.  If LIBOR starts to go up, this company is totally screwed.

10-k Notes

In September 2008 (“when the credit panic happened”), Univision was holding $371 million (Almost all of its cash!)  in one Money Market Fund … the fund “Broke the Buck” down to $.97/share and ceased operations.  Univision lost $11 million because of this.  They still have $43 million tied up in the fund awaiting final liquidation.  The fund went under because of the Lehman Brothers bankruptcy filing.  The $371 million was money that had been borrowed from their credit facility which makes no sense.  Why would you borrow money at 7% and then park it in a money market paying 1%?

(“There is Strength in Diversity” – apparently does not extend to cash management function in the Univision finance department)

The company owns 9.4 million shares (9.9%) of publicly traded Entravision.   The U.S. Justice Department required Univision to sell their investment in March 2009 to get down below 10% (They sold 6.3 million shares for $2.2 million – about $.35 a share).  This was a requirement of the FCC approval of the 2007 “going private” transaction.  Univision also made a $24 million “voluntary contribution to the U.S. Treasury” (the FCC calls it a “fine”) to settle a challenge brought by the United Church of Christ that Univision was not airing the required amount of TV programming for children. [Are you thinking Fairness Doctrine and lawsuits like this in the future?]

Profitability

Like every major TV/Radio company, Univision had a huge write down of the value of its TV and radio stations – over $5.3 billion, or about 1/3 of the total assets of the company.  $2.8 billion was related to the TV stations, and $2.4 billion for the radio stations.

The debt service costs piled on by the “privatization” are now more than 1/3 of the total gross revenue of the company.

I’ve also omitted the one time $610 million Televisa settlement, as it is an non-cash impairment of future earnings.  Other than as a tax writeoff, it seems odd that it even appears on the income statement.  But I’m not a CPA.  The company also wrote off $117 million on its investment in Entravision, and $185 million related to getting out of the music business.

All numbers in $million 2008 2007 2006 2005 2004
Total Revenue $2,020 2,072 2,025 1,746 1,608
Radio Revenue 414 430 381 ? ?
License Impairment $5,375
Operating Income
(Without Impairment)
588 479 671
Long Term Debt Balance 10,219 9,764 969 969 1,227
Debt Service Cost 753 607 91 87 66

Stock Performance

There is no publicly traded stock.     $36.25 was the “takeover” price when the company went private at around $13.7 Billion

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