DBRS Discontinues Ratings on DHX Media Limited

DBRS Limited (DBRS) has today discontinued the Issuer Rating and Senior Unsecured Notes rating of DHX Media Limited (DHX or the Company). The ratings are being discontinued at the Company’s request prior to resolving the Under Review with Negative Implications status as DBRS does not have sufficient information to adequately assess the credit risk of DHX after its acquisition of Iconix Brand Group, Inc.’s (Iconix) entertainment division, which includes an 80% interest in Peanuts Holdings LLC and a 100% interest in IBG Borrower LLC for USD 345 million (the Acquisition) that closed on June 30, 2017.

On May 11, 2017, DBRS placed DHX’s Issuer Rating and existing Senior Unsecured Notes rating Under Review with Negative Implications (see DBRS press release, “DBRS Places DHX Media Under Review with Negative Implications,” dated May 11, 2017). This rating action followed the Company’s announcement that it had signed definitive agreements to acquire the entertainment division of Iconix.

At that time, DBRS stated that, while the increase in financial leverage would likely require a negative rating action, the degree of such an action may be moderated by the significant strategic and operational benefits that DHX is poised to realize on account of the Acquisition. In its review, DBRS would have focused on assessing (1) the current business risk profile of the combined entity, including the scale, geographic diversification and operating unit utilization benefits of adding two iconic brands to the Company’s programming portfolio; (2) the risks associated with integration, achieving expected cost synergies and the execution of business development opportunities; (3) DHX’s financial risk profile on a pro forma basis (with particular emphasis on free cash flow generation); and (4) the Company’s longer-term business strategy and financial management intentions, including its deleveraging plan.

The Acquisition closed on June 30, 2017. DHX financed the Acquisition, the repayment of balances on its outstanding credit facilities due July 2019 and the expected redemption of its 5.875% Senior Unsecured Notes due December 2021 on July 11, 2017, with newly issued term debt and a convertible debenture offering.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The principal methodologies are Rating Companies in the Television Broadcasting Industry and DBRS Criteria: DBRS Recovery Ratings for Non-Investment Grade Corporate Issuers, which can be found on dbrs.com under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.