Fitch may put Univision on watch

Fitch Ratings said that following unsuccessful attempts to reach an out-of-court settlement, Univision Communications, Inc. (B/stable) and Grupo Televisa SAB began a jury trial in Los Angles this week. The agency said that if the jury finds in favor of Televisa and Univision appeals, it would likely place all of Univision's ratings on Rating Watch negative.

If Univision were to ultimately lose on appeal, Fitch would likely downgrade its issuer default rating to CCC or below, representing that default of some kind would be either a real possibility or probable.

Televisa has claimed a material breach in the Programming License Agreement by Univision since early 2006. A material breach appears to be the only way for a party to terminate the agreement, Fitch said. In addition to seeking monetary damages, Televisa seeks to be released from its obligations to provide content under the contract for the remaining term.

The amount, if any, of monetary damages that could ultimately be awarded is uncertain, but the issue of future performance under the contract is of significantly more concern to Fitch. The agency believes the elimination of the agreement would likely result in default of Univision's debt obligations because Univision would likely be unable to service its interest expense without the revenues generated from the programming supplied by Televisa.

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