Analysts warn of approaching CME cash crunch

Credit analysts say that CME’s current financial position leaves it at risk of defaulting on debt payments unless new capital from its largest shareholder, Time Warner, or elsewhere is injected into the group.

Moody’s says the European broadcast group’s credit rating is under review for downgrade in the wake of new guidance from the company suggesting it will make a substantial full-year loss of US$30-40 million (€22-30 million) instead of the previous guidance of a US$50-70 million profit.

“Given that 2014 is unlikely to see CME generate material positive free cash flow, the company’s deteriorating liquidity profile is likely to lead to a shortfall of funds that could lead to CME defaulting as soon as Q3 2014, in the absence of any new capital coming into the group,” Moody’s noted.

The credit ratings firm added that talks are underway with 49.8% shareholder Time Warner and others regarding raising new capital and its rating on the firm partly depends on the result of these discussions.

“The current ratings continue to positively incorporate assumptions of support from Time Warner; any sign of this support wavering would put immediate pressure on the rating,” Moody’s said.

CME is expected to provide detail on how its capital-raising efforts are progessing when announcing its next quarterly results. “Any further delay in coming up with a solution for the expected liquidity shortfall will likely lead to a downward revision of the rating commensurate with a higher probability of default expectation,” said Moody’s.

Last week recently-installed CME co-CEO Michael Del Nin (pictured) slammed the firm’s Q3 performance as “unacceptable” as its revenues tumbled and it reported an operating loss of US$45 million.

In an ensuing conference call, Del Nin said CME plans to cut 1,000 staff by the end of the year and that it is in the process of reviewing its “non-core businesses,’ in the wake of the poor results.