S&P Lowers Carlton’s Credit Rating

24 October 2001

Beleaguered British media group Carlton Communications, hit by the ad downturn and the disappointing growth of ITV Digital (the terrestrial digital platform it co-owns with Granada Media), has seen its credit rating slashed.

Standard & Poor’s revealed it was reducing the company’s credit and debt ratings “by two notches”. In financial speak, this means its long-term corporate credit and senior unsecured debt ratings have been cut from A- to BBB; its short-term corporate credit and commercial paper ratings are down from A-2 to A-3; and its long-term subordinated debt rating falls from BBB+ to BBB-.

S&P explained that Carlton’s financial prowess had been hit by the “substantial burden of developing its joint venture in the digital terrestrial pay-TV platform … and related digital programme channels. These costs are absorbing all of Carlton’s operating cash flow from commercial television and weakening its credit ratios.”

In addition, S&P pointed to the performance of commercial network ITV, Carlton’s major revenue source. “During 2001, ITV has led the recession in UK advertising sales,” it continued.

Carlton rejected claims it was facing funding problems. “We have a strong balance sheet,” it said. “We are fully funded. We are highly liquid.”

However, in a separate move the media group announced it is to axe its Carlton Food Channel at the end of the year due to falling ad revenue and the failure to hit TV and online targets. Losses and Carlton’s total investment in the project were not revealed.

In August, Carlton scrapped its Taste Network joint venture with supermarket chain J Sainsbury, the result of weak ad and sales revenues [WAMN: 10-Aug-01].

News source: CampaignLive (UK)