S&P outlook on AOL Time Warner negative

S&P outlook on AOL Time Warner negative
Our Corporate Bureau
27 July 2002
New York: The weak operating performance of AOL business units (Internet services) has impacted the outlook for AOL Time Warner Inc. The global rating agency Standard & Poors (S&P) has revised its outlook for the company to negative from the earlier stable tag.

The city-based AOL Time Warner is the largest US media company with vertically integrated positions in publishing, music, filmed entertainment, cable networks, cable television, and Internet services.

S&P is also concerned with AOLs weaker than expected operating performance. The status may continue due to deteriorating advertising sales that could weaken credit measures, says S&P analyst Heather Goodchild. The decline in America Online EBITDA places a burden on the Time Warner divisions to deliver performance that will meet earnings targets.

Says S&P credit analyst Andrew Watt: Traditional advertising channels are in the early stages of a weak recovery. Greater concern surrounds the timeframe for a recovery in Internet spending.

In addition, the SEC inquiry announced by the company on 24 July 2002 adds to recent investor uncertainty and could consume significant management time and attention as it strives to stabilise operating performance. Last week the company reorganised its organisational set up, which according to S&P is a positive step.

S&P has, however, affirmed its ratings, including its triple-B-plus corporate credit rating on the company and also for the companys new $10-billion revolving credit facility. This rating reflects the solid operating performance of the companys remaining business units, strong market positions, diversified operations as the largest media company, a moderate financial profile, and adequate liquidity, says Goodchild.

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