Citing the dismal ad market, Moody's Investors Service Inc. has issued a
negative outlook and lowered its rating on the $100 million debt of Jones Media
Networks, which owns Great American Country.
The downgrade, which warns of 'a high probability of default over the rating
horizon,' came amid talk from sources that MTV Networks was looking to acquire
The cable network, which airs county-music videos, competes directly against
MTVN's CMT: Country Music Television.
In its report, Moody's noted that Jones Media 'has expressed a willingness to
sell underutilized assets to bolster its liquidity position.'
Moody's described Jones Media's liquidity position as 'thin' -- a position
that 'leaves the company no room for error.'
Jones Media president Jeff Wayne declined to comment on what 'underutilized
assets' the company might sell. He also said he has 'no knowledge' of GAC being
on the block or of MTVN trying to acquire it.
'It would be news to me if MTVN was buying GAC,' Wayne said.
MTVN officials couldn't be reached for comment.
Moody's dropped the rating on Jones Media's $100 million in 11.75 percent
secured notes, due 2005, to 'Caa2' from 'B3.' Jones' senior unsecured issuer
rating is 'Caa3' and the company's senior implied rating is Caa2.
The report noted that the Caa2 rating 'implies a high probability of
default,' and 'if the company's credit profile worsens, greater deterioration in
asset value could occur.'
Moody's noted that 90 percent of Jones Media's revenue is ad-based because of
its cable and syndicated radio-network holdings, and advertising in general is
expected to be soft well into 2002.
Jones Media's holdings include not only GAC, but also Product Information
Network (which Cox Communications Inc. also has a stake in), Jones Radio
Networks, Jones Earth Segment and Jones Space Holdings.
In its report, Moody's said the soft ad market 'and Jones' need to offer
launch incentives to cable operators in order to increase the distribution of
its developing GAC' will keep the company free-cash-flow-negative in the near
Regarding the debt downgrade, Wayne said, 'We're in pretty good shape. We
think Moody's report has more to do with market conditions in general, with
what's happening with Enron [Corp.] and Global Crossing [Ltd.]. Moody's is
extremely conservative right now.'
Moody's analyst Russ Solomon said he doesn't expect Jones Media to divest
'I don't see that as a candidate,' he said. 'The company has done a good job
with that asset.'
Several years ago, Jones sold off one of its cable networks, Knowledge TV, to
Discovery Communications Inc. DCI folded Knowledge TV and used its distribution
for other DCI networks.
GAC is in 16.9 million homes, according to Nielsen Media Research. CMT is in
CMT and TNN: The Nashville Network came under MTVN's wing when their owner,
CBS, merged with Viacom Inc. two years ago.
GAC had made great strides, particularly with smaller cable operators,
against CMT while CBS owned it.
But CMT has become a more formidable competitor now that it has MTVN's
distribution clout behind it, and it has become the company sole country-music
MTVN has changed TNN's format from country music, making it a popular-culture
network under the new name TNN: The National Network. MTVN is also adding
original programming to CMT's roster.
For the three months ended Sept. 30, 2001, revenue from GAC and PIN increased
12 percent to $8.8 million from $7.9 million during the same period in the prior
year, according to a Jones Media filing with the Securities and Exchange
Commission. Operating losses increased in that three-month period, growing by
$100,000 to $700,000 from $600,000.
Mike Farrell contributed to this report.