Viacom Inc. chairman Sumner Redstone said the focus of the entertainment giant will continue to be on high-growth businesses, adding that he would be willing to leverage the company and lower its credit rating in order to free up cash for share buybacks or cable-network acquisitions.
Redstone, speaking at the Citigroup Smith Barney Media, Entertainment and Telecommunications conference in Phoenix Tuesday night, said Viacom is considering lowering its credit rating from its current “A-minus” level. He added as an example that lowering the company’s rating to “triple-B” would free up billions of dollars in cash.
“We are now scrutinizing our A-minus rating,” Redstone said. “Our competitors have ratings below that, and we are looking at the question as to whether we should accept a lower rating, leverage the company up and use the money to benefit our stockholders.”
That benefit could be in the form of increasing its stock-buyback program -- Viacom has already purchased about $2 billion of its own stock, and it has authorized an $8 billion buyback program -- or through acquisitions of cable channels.
Redstone would not specify just what cable networks he would consider purchasing.
“We’re in the market for any good cable channel that is within our price range,” he said.
Other areas earmarked for that additional money are the Internet -- where Redstone said Viacom was “underinvested and underrepresented” -- and video games.
Redstone said he would like to return Viacom to the 15%-16% annual growth rates of the past, adding that the keys to achieving that goal are improving its Paramount Pictures movie studio and its Infinity Broadcasting Corp. radio unit.
He added that Viacom is also looking to shed underperforming assets, like its Canadian theater circuit and small-market radio and television stations.
Viacom may get that lower credit rating whether it wants to or not. In a statement Wednesday afternoon, Moody’s Corp. said Viacom’s rating could be lowered even if its board does not decide to increase the company’s leverage, “because of concern over management’s softened commitment to maintaining the rating, which increases the risk of higher-leverage targets to achieve the same goals in the longer-term.”
Viacom stock was down 11 cents each to $38.53 per share in afternoon trading Wednesday.