Pity poor Jean-Marie Messier: Just as he overcomes one insult in his quest to make
a global media giant, here comes another one.
On Friday, the debt ratings agency Moody's Investors Service downgraded the company's long-term senior debt rating from Baa2 to Baa3, saying Vivendi might not be able to cut its debt as quickly and comprehensively as it hopes.
Furthermore, Moody's said that despite a strong first-quarter performance, Vivendi might be "challenged" in meeting its financial goals for the year, given softness in the music market and weakness in the U.S. educational publishing market -- a business outlook that doesn't bode well, either, for other media conglomerates including
AOL Time Warner
The news came only a day after a French court agreed with Vivendi's prior claim that there were tabulation errors, perhaps as a result of computer hacking, with votes cast at the company's contentious shareholder meeting last week. That gives Messier another chance to win approval for an executive compensation plan that got voted down at the Paris meeting last month.
The ratings change Friday pushed Vivendi's stock down to ever-lower lows. The stock, which has a 52-week high of $69.15, closed at $29.07 Friday, down 5%.
Moody's report wasn't completely negative. The ratings service acknowledged Vivendi's "unequivocal commitment to debt reduction and solid recent operating results," and it said the company had made "meaningful progress" in integrating the businesses that came together in the 2000 three-way merger of Vivendi, Canal Plus and Seagrams.
Moody's also said that although Vivendi Universal had a bang-up first quarter, it would be hard-pressed to meet full-year financial targets. (Messier has promised 10% revenue growth for the year.) Among other issues, Moody's says Vivendi's Universal Music Group faces difficulty in protecting and increasing its results in the face of a continuing worldwide cyclical downturn in the music market, piracy and the migration to Internet distribution.
In addition, said Moody's, despite Vivendi's first-quarter outperformance in cash-flow generation, the company is unlikely to achieve meaningful excess cash flow during 2002 once the outflow for its 2001 dividend is taken into consideration.
In response to the downgrade, Vivendi issued a statement saying "this decision does not fully take into consideration the currently poor market conditions and the fact that the agency does not take into account immediately the whole of the debt reduction program planned by Vivendi Universal."
The company added, "Vivendi Universal affirms that it has every confidence in its ability to meet its operating targets for 2002, as proved by its first-quarter results. The company is totally determined to carry through its debt reduction program in order to make a rapid return to a comfortable position with a Baa2 rating."
The worries at Vivendi have come to a head just a week after rival AOL Time Warner
slashed its 2002 cash-flow estimates, owing to the weak advertising market. Further muddying the waters in the entertainment and media businesses,
said last week that it was
seeing stronger demand than AOL was.