The principal debt was incurred in 1993 when then-chairman and CEO Emilio Azcarraga Milmo bought out the holdings of his sister, Laura de Diez Barroso, for $726 million. The debt had ballooned to more than $1 billion between interest payments and buy-outs of other minority shareholders by the time of his 1997 death. Son and current top executive Emilio Azcarraga Jean then assumed the burden, much of which was guaranteed by Televisa stock.
The resulting pressure on the stock price and on Azcarraga Jean created uncertainty around the company, which should now be eliminated, some analysts say. "Now an investor, in my mind, can focus on the fundamentals," says analyst Whitney Johnson of Salomon Smith Barney. "Are they growing the top line? Are margins expanding under the cost-cutting efforts?"
Under the plan announced Feb. 1, $213 million in Grupo Alameda (a Televicentro affiliated investment arm) debt will be capitalized, to be held in a non-voting trust by Mexican banks Banamex and Inbursa. Televicentro has a four-year option to buy out the two banks, during which time they cannot sell their shares.
Inbursa, controlled by Carlos Slim, reportedly had acquired $70 million in Alameda debt last October from Goldman Sachs. Mr. Slim was already a co-investor with Televisa via his 49% stake in cable company Cablevision through Telefonos de Mexico.
An unnamed Televisa subsidiary will purchase the 4.19% in Televisa stock held by Alameda for $230 million, proceeds from which will be used to pay down debt directly. Alameda will become a direct subsidiary of Televisa.
Another $290 million "will be released by the unwinding of the repurchase agreement," Televicentro said in a statement, an apparent reference to the October 1998 deal that gave the Diez Barroso family a 21% equity stake in the holding.
Televisa itself also announced a stock share repurchase program of up to $50 million in a bid to bolster the stock price further. Televisa has been trading well below its 52-weekhigh of almost $47.
Copyright February 1999, Crain Communications Inc.