The influential credit ratings agency further warned that the media giant’s rating could be downgraded if the decline in its performance is not arrested, and the company continues to make ‘ill afforded dividend payments in the face of diminishing financial strength’.
Viacom, which runs some of the biggest TV channel brands in the US and international markets, is in the midst of a corporate battle between CEO Philippe Dauman and Sumner Redstone, who ultimately has control of the company via its parent group National Amusements.
Moody’s said it will not make a ratings decision until that court action plays out, but noted Viacom is in crisis.
“Moody’s is not downgrading Viacom’s credit ratings at this time as the company is in the midst of an unprecedented corporate governance crisis, the outcome of which could heavily impact its future fiscal policies and strategic direction,” the agency said.
It added that reducing the dividend Viacom pays shareholders in light of its poor performance would shore up its position and indicate management was committed to ‘prudent fiscal policies’ although would not be enough to preserve the company’s credit rating unless accompanied by a lift in ratings and ad revenues.
Moody’s said that selling Paramount, a central issue in the Dauman-Redstone battle, would allow Viacom to reduce debt to acceptable levels and give it greater financial flexibility.
Should Redstone prevail and Paramount remain part of the company the outlook would depend upon how ensuing management changes, with Dauman and his close lieutenants likely to exit, played out.