Vivendi’s Credit Stretch

Universal Music Group’s Paris-based parent company has denied it raised $427 million by selling a 3 percent stake in its lucrative games business because it was worried about its credit rating.

It also denied that the sale of part of its interest in video game developer Activision Blizzard showed a need to bring in some cash following the $1.9 billion purchase of EMI’s recorded music business.

However, on Nov. 21, three days after the Activision deal was announced, Vivendi said it lengthened the duration of its debt by issuing bonds worth euro 1 billion.

Vivendi, which has a triple-B credit rating, an indication that the banks consider it to be sound, says the Activision deal was “tactical” and was intended to improve the French company’s “overall capital structure.”

The French media and telecom group did, however, acknowledge that the EMI deal will be the last of a number of recent acquisitions, fueling speculation that it’s exhausted its debt capacity.

Media analysts at Bernstein Research, which specialises in independent surveys of major institutional clients, said it was “quite natural” for business analysts to connect the sale with the EMI purchase.

The private sale of 35 million shares at $12.20, down from an initial offering price of $12.30, only brings Vivendi’s Activision stake back to 60 percent, which was what it had at the beginning of the year.