Moody's puts VNU on review

Moody's Investors Service put VNU NV on review for possible downgrade including its senior unsecured debt at Baa1.

Moody's said the review was prompted by its concern that additional expensed investment in VNU's businesses, in particular marketing information, some uncertainty about the performance of its directories unit and its business publications and a reasonable likelihood that the company is going to make moderate add-on acquisitions over the intermediate term could prevent VNU from achieving debt protection measurements that support its current Baa1 rating level.

At this stage Moody's said it expects that any possible downgrade would be limited to one notch.

VNU's reported results for 2003 were adversely affected by a deteriorating euro/dollar exchange rate, with reported revenues and operating profit declining by 9% and 14%, respectively. However, on an organic basis, VNU experienced both operating profit and (more moderate) revenue growth. Growth in organic operating profit was largely driven by the strength of VNU's Media Measurement & Information division (organic operating profit +25%). The Marketing Information division, while also delivering good organic revenue growth, showed some margin contraction due to a reorganization charge and new product investment.

While debt declined by €568 million (on a net basis), Moody's noted that more than half of that reduction was due to lower euro/dollar exchange rates at the year-end and relative indebtedness remains high (3.6x net debt/EBITDA).

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