WEBVTT - Bloomberg's Orr on Viacom Debt, Nizza on Nigel Farage (Audio)

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<v Speaker 1>Global business news twenty four hours a day. If Bloomberg

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<v Speaker 1>I'm Charlie Pada, move lawer on this Wednesday. The Dow,

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<v Speaker 1>the SMP NEZ stack Hall declining as investors await Friday's

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<v Speaker 1>barrel of West Texas Intermediate actually down two point eight percent.

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<v Speaker 1>six seventy five. Brand Crew it is down one point nine.

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<v Speaker 1>I'm Charlie Peloton. That's a Bloomberg business flash. You're listening

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<v Speaker 1>to taking stoff with Kathleen Hayes and Pim Fox on

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<v Speaker 1>Bloomberg Radio and up next on Bloomberg Radio, it's Viacom.

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<v Speaker 1>The gift that keeps on giving could be an entertainment

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<v Speaker 1>story in and of itself, just the moves at this company.

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<v Speaker 1>But today Emma or our corporate finance reporter at Bloomberg News,

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<v Speaker 1>is going to talk a little bit about a potential

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<v Speaker 1>twelve billion dollar down grade. What's going on here, Emma, Hey, Alex.

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<v Speaker 1>Uh So, with their legal troubles behind them, the next

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<v Speaker 1>big challenge via Common is facing is their twelve billion

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<v Speaker 1>dollars of debt, which is yielding higher than the investment

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<v Speaker 1>grade rating it currently has, closer to junk levels. Um,

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<v Speaker 1>they're on negative watch from the ratings agencies. Uh So,

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<v Speaker 1>they basically are faced with a choice. They have to

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<v Speaker 1>either accept a down grade or take some pretty drastic

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<v Speaker 1>measures like cutting their dividend um raising equity financing or

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<v Speaker 1>potentially the sale of Paramount or a merger with CBS Corp.

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<v Speaker 1>To d lever and decrease that debt so keep satiating

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<v Speaker 1>those uh dividend receivers, or kind of figure out some

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<v Speaker 1>structural changes. What are the kind of pros and cons

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<v Speaker 1>and on either side of this decision here, I mean

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<v Speaker 1>it's it's a complicated situation. You know, obviously the equity

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<v Speaker 1>holders would love to be receiving those dividends. On the

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<v Speaker 1>other hand, UM Viacom is paying a much higher dividend

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<v Speaker 1>at three point eight percent than the SMP average or

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<v Speaker 1>than their sister company cbs UM. There's also, you know,

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<v Speaker 1>been talk that if they are to cut that dividend,

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<v Speaker 1>they'll have more cash to reinvest in their networks, which

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<v Speaker 1>have been struggling. So UM that would be another perk there.

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<v Speaker 1>Decreasing that debt level would give them more flexibility in

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<v Speaker 1>other areas. So in terms of all of this executive

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<v Speaker 1>turnover that we've seen at Viacom, OUSTID CEO Philip Dalmont

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<v Speaker 1>has proposed a sale of the stake in paramount. How

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<v Speaker 1>how is that playing into this whole situation here? You know,

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<v Speaker 1>that would help them de lever It would decrease that

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<v Speaker 1>amount of debt, give them more capital. Delman thinks that

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<v Speaker 1>it could raise as much as four billion dollars for

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<v Speaker 1>the company and that would in theory help protect the

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<v Speaker 1>investment grade rate. Yes, absolutely, if that were to happen,

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<v Speaker 1>then they would have a lot more flexibility in terms

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<v Speaker 1>of being able to keep the dividend other things, UM

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<v Speaker 1>avoid you know, having to raise equity. UM. However, controlling

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<v Speaker 1>shareholders Sumner and Sherry Redstone are opposed to that deal.

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<v Speaker 1>Uh So it's unclear if that's really even a possibility

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<v Speaker 1>that's on the table. UM. That A lot of that

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<v Speaker 1>hinges on whether Dmon is able to convince the new board. Now,

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<v Speaker 1>Emma Mario Gabelli, who was a Viacom shareholder, he was

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<v Speaker 1>speaking on Bloomberg Television on Monday, and he opposes selling

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<v Speaker 1>the entire studio. Correct. And so would Philippe Balman actually

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<v Speaker 1>profit personally by this sale? I don't believe so. Okay,

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<v Speaker 1>but he has until September in order to gain the

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<v Speaker 1>board's approval for paramount sale. That's right, And what he's

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<v Speaker 1>looking to gain approval for is a sale of a

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<v Speaker 1>partial stake of forty percent. The company actually included UM

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<v Speaker 1>in a recent filing of by law saying that he

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<v Speaker 1>could not pursue a full sale of paramount. When you

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<v Speaker 1>look at from your side in the debt world, what

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<v Speaker 1>are debt investors betting are going to happen here? I

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<v Speaker 1>mean the bonds are up a lot this year. Actually,

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<v Speaker 1>they've performed since the legal uh settlement. I think the

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<v Speaker 1>second best of similar rated bonds in terms of total returns. UM.

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<v Speaker 1>So it seems like investors are betting that they will

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<v Speaker 1>take the necessary steps to keep that investment grade rating,

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<v Speaker 1>and that is what I've heard from analysts. UM. It

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<v Speaker 1>seems in this case that both equity and debt analysts

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<v Speaker 1>are kind of aligned in what they would like the

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<v Speaker 1>company to do, which is to take those steps to

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<v Speaker 1>keep that investment grade rating. H you think it's going

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<v Speaker 1>to turn into a Ben Her movie remake. That's a

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<v Speaker 1>Paramount movie. It is, it is, and it's not estimated

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<v Speaker 1>million at the box office. Yeah, that none of their

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<v Speaker 1>films in the past year have been doing so well.

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<v Speaker 1>Paramount has really kind of been a money sucking operation

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<v Speaker 1>in the past year. UM. I think people are hoping,

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<v Speaker 1>you know, that with a good film or two that

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<v Speaker 1>could turn around, but it has not contributed to profit

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<v Speaker 1>ord which seems like an issue of if it's a

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<v Speaker 1>money sucking organization and to retire this debt, if via

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<v Speaker 1>convert take out that option, they basically have little cash

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<v Speaker 1>left to do anything else. According to OURBC Capital analysts.

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<v Speaker 1>So it seems like they're they're in quite the spot here, right, Yeah,

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<v Speaker 1>and a lot hinges on, you know, the decisions that

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<v Speaker 1>this new board makes. So um, it seems like the

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<v Speaker 1>company really, you know, is sort of in a paralyzed state,

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<v Speaker 1>waiting for the board to come in and essentially decide

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<v Speaker 1>how they want to deal with this debt, if they

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<v Speaker 1>want to deal with this debt, or if they would

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<v Speaker 1>rather accept that ratings cut and you know, continue you

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<v Speaker 1>pursuing things like paying that dividend. Now, the Viacom shareholders

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<v Speaker 1>are kind of divided because there are multiple classes of stock.

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<v Speaker 1>Can you tell us what are the multiple classes? And

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<v Speaker 1>do they each receive the same dividend? Uh? They do not. Um.

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<v Speaker 1>The Class B shaleholders are the ones that received that

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<v Speaker 1>three point eight percent dividend, right, and this dividend, even

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<v Speaker 1>if it was cut, what would it save him about

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<v Speaker 1>six million a year? About six million? Yeah? Um? And

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<v Speaker 1>you know, debt investors I think are hoping that money

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<v Speaker 1>would be used to pay down maturities. Um. They do

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<v Speaker 1>have enough free cash flow to pay down all of

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<v Speaker 1>their maturities in the coming twelve months. So um, this

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<v Speaker 1>would be more of a long term solution, you know,

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<v Speaker 1>addressing that dad that comes in incoming years, and Viacom

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<v Speaker 1>also has its own governance issues that it's dealing with.

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<v Speaker 1>Is there any spillover from the fight in the boardroom

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<v Speaker 1>to the fight over whether these asset sales will take

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<v Speaker 1>place or a dividend cut will be enacted in order

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<v Speaker 1>to shore up their debt payment facilities. I don't think

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<v Speaker 1>there's spillover so much as that the company um is

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<v Speaker 1>kind of waiting until the board decides the next steps

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<v Speaker 1>they want to take. It seems like they're kind of

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<v Speaker 1>dependent on the decisions the board makes, so a lot

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<v Speaker 1>hinges on, you know, the changes that are coming in

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<v Speaker 1>governance and how that plays out. I'm just curious. Philippe

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<v Speaker 1>Doman is no longer the correct president and chief executive Viacom,

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<v Speaker 1>right right? Um? Yeah, So why does he have until

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<v Speaker 1>September to be involved in any of these decisions? I mean,

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<v Speaker 1>I think he was really pushing for that sale, and

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<v Speaker 1>I think that as part of the legal settlement, he

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<v Speaker 1>asked that he had that opportunity. Um. It seems that

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<v Speaker 1>he feels very strongly that that's the right choice the

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<v Speaker 1>company takes, so they've given him you know, the chance

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<v Speaker 1>to to pitch that to the board and too hopefully

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<v Speaker 1>convinced them. Do we know? Do we know what Sherry Redstone,

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<v Speaker 1>who is currently the vice chairman of the of the board,

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<v Speaker 1>she along with Sumner Redstone, does not seem to be

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<v Speaker 1>on board. Um they have. They have opposed the sale.

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<v Speaker 1>It's unclear to what extent they fully opposed the actual

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<v Speaker 1>sale and to what extent it's that they oppose. You know,

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<v Speaker 1>Philip Dolman as a sort of lame duck CEO making

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<v Speaker 1>that decision. So you know, right now, I think it's

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<v Speaker 1>it's in a stage where he's trying to convince the

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<v Speaker 1>Redstones that this is the right move, and I think

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<v Speaker 1>it's anyone's guests how that will play out. Well, we

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<v Speaker 1>know we're going to turn to you for more details

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<v Speaker 1>when if it does get resolved. Viacom shares the b

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<v Speaker 1>shares down twenty three cents right now forty one forty

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<v Speaker 1>seven cents. The shares are basically unchanged so far this year.

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<v Speaker 1>Let's turn our attention now to the world of politics.

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<v Speaker 1>I want to bring in Mike Nietz. He is our

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<v Speaker 1>executive editor for Bloomberg of politics and Mike Uh. The

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<v Speaker 1>Trump campaign is holding a rally of fifteen thousand Republicans supporters.

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<v Speaker 1>It will be held at the in Jacksonville, Mississippi. It's

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<v Speaker 1>taking place tonight and there's gonna be a special guest

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<v Speaker 1>appearing with Donald Trump. Who is it? Well that uh

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<v Speaker 1>the this is like the greatest rumor of the day. Uh.

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<v Speaker 1>Nigel faradge uh, the famous Brexit UH leader in Britain,

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<v Speaker 1>has said he told a Daily Telegraph in Britain that

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<v Speaker 1>he would be at the rally speaking on the same

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<v Speaker 1>platform as Donald Trump. We haven't been able to cook

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<v Speaker 1>for him that anywhere else today. Of that's a lot

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<v Speaker 1>of people. But with the new leadership of the Trump

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<v Speaker 1>campaign taking over, with including Steve Bannon, who is the

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<v Speaker 1>who is a great supporter of faradges Um, it seems

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<v Speaker 1>like it could just happen. What are the kind of

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<v Speaker 1>ideological parallels here between these two characters. So so if

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<v Speaker 1>you if you remember a few days ago, Donald Trump

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<v Speaker 1>treated they're gonna they're gonna be calling me Mr Brexit, right,

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<v Speaker 1>and it kind of came out of nowhere and everyone

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<v Speaker 1>was like, what does he talking about? And it's part

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<v Speaker 1>of it is uh is this uh this outsider populist

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<v Speaker 1>movement of people who who don't like the uh, you

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<v Speaker 1>know what elites have set up, including you know, trade

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<v Speaker 1>deals that that they view is unfair, and you know,

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<v Speaker 1>declining manufacturing jobs, those kinds of things, and UH Trump

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<v Speaker 1>and Steve ben and UH both see this, see this

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<v Speaker 1>not only as a movement that happens in and Britain,

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<v Speaker 1>but also in the US and across Europe. I want

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<v Speaker 1>to thank you very much for telling us, and I

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<v Speaker 1>guess we'll just have to see what happens if indeed

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<v Speaker 1>Nigel Farage, the head of the UK Party, shows up

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<v Speaker 1>in Jacksonville, Mississippi, with those fifteen thousand Republicans. Mike Nizza

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<v Speaker 1>is executive editor for Bloomberg Politics. You can follow him

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<v Speaker 1>on Twitter at Mike Nitze. This is taking Stock. I'm

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<v Speaker 1>pim Fox. My co host Alex Barrinka coming up on

0:10:59.480 --> 0:11:03.120
<v Speaker 1>taking Stock. We're gonna be talking about what to do

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<v Speaker 1>with your money when it comes to investing in commodities.

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<v Speaker 1>We're going to talk about glen Core's earnings. They dropped

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<v Speaker 1>sixty six percent. That's next