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

a drop of six tens of one percent down. Industrials down forty five, a drop of two tens up one percent. The tenure down to thirty seconds that yield one point five five percent. Gold down eighteen dollars an ounce now to twenty four, a drop of one point three percent. And crude oil is down one point three percent. Of barrel of West Texas Intermediate actually down two point eight percent. Uh w t I down a dollar thirty five now six seventy five. Brand Crew it is down one point nine.

I'm Charlie Peloton. That's a Bloomberg business flash. You're listening to taking stoff with Kathleen Hayes and Pim Fox on Bloomberg Radio and up next on Bloomberg Radio, it's Viacom. The gift that keeps on giving could be an entertainment story in and of itself, just the moves at this company. But today Emma or our corporate finance reporter at Bloomberg News, is going to talk a little bit about a potential twelve billion dollar down grade. What's going on here, Emma, Hey, Alex.

Uh So, with their legal troubles behind them, the next big challenge via Common is facing is their twelve billion dollars of debt, which is yielding higher than the investment grade rating it currently has, closer to junk levels. Um, they're on negative watch from the ratings agencies. Uh So,

they basically are faced with a choice. They have to either accept a down grade or take some pretty drastic measures like cutting their dividend um raising equity financing or potentially the sale of Paramount or a merger with CBS Corp. To d lever and decrease that debt so keep satiating those uh dividend receivers, or kind of figure out some structural changes. What are the kind of pros and cons and on either side of this decision here, I mean

it's it's a complicated situation. You know, obviously the equity holders would love to be receiving those dividends. On the other hand, UM Viacom is paying a much higher dividend at three point eight percent than the SMP average or than their sister company cbs UM. There's also, you know, been talk that if they are to cut that dividend, they'll have more cash to reinvest in their networks, which have been struggling. So UM that would be another perk there.

Decreasing that debt level would give them more flexibility in other areas. So in terms of all of this executive turnover that we've seen at Viacom, OUSTID CEO Philip Dalmont has proposed a sale of the stake in paramount. How how is that playing into this whole situation here? You know, that would help them de lever It would decrease that

amount of debt, give them more capital. Delman thinks that it could raise as much as four billion dollars for the company and that would in theory help protect the investment grade rate. Yes, absolutely, if that were to happen, then they would have a lot more flexibility in terms of being able to keep the dividend other things, UM avoid you know, having to raise equity. UM. However, controlling shareholders Sumner and Sherry Redstone are opposed to that deal.

Uh So it's unclear if that's really even a possibility that's on the table. UM. That A lot of that hinges on whether Dmon is able to convince the new board. Now, Emma Mario Gabelli, who was a Viacom shareholder, he was speaking on Bloomberg Television on Monday, and he opposes selling the entire studio. Correct. And so would Philippe Balman actually profit personally by this sale? I don't believe so. Okay, but he has until September in order to gain the

board's approval for paramount sale. That's right, And what he's looking to gain approval for is a sale of a partial stake of forty percent. The company actually included UM in a recent filing of by law saying that he could not pursue a full sale of paramount. When you look at from your side in the debt world, what are debt investors betting are going to happen here? I mean the bonds are up a lot this year. Actually, they've performed since the legal uh settlement. I think the

second best of similar rated bonds in terms of total returns. UM. So it seems like investors are betting that they will take the necessary steps to keep that investment grade rating, and that is what I've heard from analysts. UM. It seems in this case that both equity and debt analysts are kind of aligned in what they would like the company to do, which is to take those steps to keep that investment grade rating. H you think it's going to turn into a Ben Her movie remake. That's a

Paramount movie. It is, it is, and it's not estimated million at the box office. Yeah, that none of their films in the past year have been doing so well. Paramount has really kind of been a money sucking operation

in the past year. UM. I think people are hoping, you know, that with a good film or two that could turn around, but it has not contributed to profit ord which seems like an issue of if it's a money sucking organization and to retire this debt, if via convert take out that option, they basically have little cash left to do anything else. According to OURBC Capital analysts. So it seems like they're they're in quite the spot here, right, Yeah, and a lot hinges on, you know, the decisions that

this new board makes. So um, it seems like the company really, you know, is sort of in a paralyzed state, waiting for the board to come in and essentially decide how they want to deal with this debt, if they want to deal with this debt, or if they would rather accept that ratings cut and you know, continue you pursuing things like paying that dividend. Now, the Viacom shareholders are kind of divided because there are multiple classes of stock. Can you tell us what are the multiple classes? And

do they each receive the same dividend? Uh? They do not. Um. The Class B shaleholders are the ones that received that three point eight percent dividend, right, and this dividend, even if it was cut, what would it save him about six million a year? About six million? Yeah? Um? And you know, debt investors I think are hoping that money would be used to pay down maturities. Um. They do have enough free cash flow to pay down all of

their maturities in the coming twelve months. So um, this would be more of a long term solution, you know, addressing that dad that comes in incoming years, and Viacom also has its own governance issues that it's dealing with. Is there any spillover from the fight in the boardroom to the fight over whether these asset sales will take place or a dividend cut will be enacted in order

to shore up their debt payment facilities. I don't think there's spillover so much as that the company um is kind of waiting until the board decides the next steps they want to take. It seems like they're kind of dependent on the decisions the board makes, so a lot hinges on, you know, the changes that are coming in governance and how that plays out. I'm just curious. Philippe Doman is no longer the correct president and chief executive Viacom, right right? Um? Yeah, So why does he have until

September to be involved in any of these decisions? I mean, I think he was really pushing for that sale, and I think that as part of the legal settlement, he asked that he had that opportunity. Um. It seems that he feels very strongly that that's the right choice the company takes, so they've given him you know, the chance to to pitch that to the board and too hopefully

convinced them. Do we know? Do we know what Sherry Redstone, who is currently the vice chairman of the of the board, she along with Sumner Redstone, does not seem to be on board. Um they have. They have opposed the sale. It's unclear to what extent they fully opposed the actual sale and to what extent it's that they oppose. You know, Philip Dolman as a sort of lame duck CEO making

that decision. So you know, right now, I think it's it's in a stage where he's trying to convince the Redstones that this is the right move, and I think it's anyone's guests how that will play out. Well, we know we're going to turn to you for more details when if it does get resolved. Viacom shares the b shares down twenty three cents right now forty one forty seven cents. The shares are basically unchanged so far this year. Let's turn our attention now to the world of politics.

I want to bring in Mike Nietz. He is our executive editor for Bloomberg of politics and Mike Uh. The Trump campaign is holding a rally of fifteen thousand Republicans supporters. It will be held at the in Jacksonville, Mississippi. It's taking place tonight and there's gonna be a special guest appearing with Donald Trump. Who is it? Well that uh

the this is like the greatest rumor of the day. Uh. Nigel faradge uh, the famous Brexit UH leader in Britain, has said he told a Daily Telegraph in Britain that he would be at the rally speaking on the same platform as Donald Trump. We haven't been able to cook for him that anywhere else today. Of that's a lot of people. But with the new leadership of the Trump campaign taking over, with including Steve Bannon, who is the who is a great supporter of faradges Um, it seems

like it could just happen. What are the kind of ideological parallels here between these two characters. So so if you if you remember a few days ago, Donald Trump treated they're gonna they're gonna be calling me Mr Brexit, right, and it kind of came out of nowhere and everyone

was like, what does he talking about? And it's part of it is uh is this uh this outsider populist movement of people who who don't like the uh, you know what elites have set up, including you know, trade deals that that they view is unfair, and you know, declining manufacturing jobs, those kinds of things, and UH Trump and Steve ben and UH both see this, see this not only as a movement that happens in and Britain,

but also in the US and across Europe. I want to thank you very much for telling us, and I guess we'll just have to see what happens if indeed Nigel Farage, the head of the UK Party, shows up in Jacksonville, Mississippi, with those fifteen thousand Republicans. Mike Nizza is executive editor for Bloomberg Politics. You can follow him on Twitter at Mike Nitze. This is taking Stock. I'm pim Fox. My co host Alex Barrinka coming up on

taking Stock. We're gonna be talking about what to do with your money when it comes to investing in commodities. We're going to talk about glen Core's earnings. They dropped sixty six percent. That's next