|[February 19, 2014]
Fitch Rates Comcast's Sr. Unsecured Notes 'A-'; Outlook Stable
CHICAGO --(Business Wire)--
Fitch Ratings has assigned an 'A-' rating to Comcast (News - Alert) Corporation's
(Comcast) benchmark size, senior unsecured notes maturing 2024 and 2044.
Proceeds from the offering are expected to be used for general corporate
purposes which may include the repayment of amounts outstanding under
the company's commercial paper program and a portion of NBCUniversal's
$900 million principal amount of 2.1% notes due April 2014. The notes
will be guaranteed by Comcast's subsidiaries included in the company's
cross-guaranty structure. The Rating Outlook for all of Comcast's
ratings is Stable. As of Dec. 31, 2013 Comcast had approximately $48.6
billion of debt outstanding, including $11.2 billion outstanding at
NBCUniversal Media, LLC (NBCUniversal).
KEY RATING DRIVERS
--Comcast's pending merger with TWC is strategically sound and creates
significant opportunity to realize operating and capital spending
efficiencies with minimal execution risk and enables the combined entity
to effectively compete on a national scale for incremental commercial
--The all-stock consideration structure of the merger with TWC is not
expected to have a material impact on Comcast's credit protection
--Comcast's capital structure and financial strategy remains intact and
centered on reducing leverage to its target of between 1.5x and 2.0x.
--Fitch does not expect any material change to Comcast's capital
allocation strategy over the near term and believes there is sufficient
capacity within the ratings to accommodate a contemplated expansion of
Comcast's share repurchase authorization.
Comcast's ratings reflect its strong competitive position as one of the
largest video, high-speed Internet and phone providers to residential
and business customers in the U.S. and the company's compelling
subscriber clustering profile. In Fitch's view, NBCUniversal's size,
scale, leading brand positions, and diversity of operations and business
risk as one of the world's leading media and entertainment companies,
all lower the business risk attributable to Comcast's credit profile.
These factors also create new avenues for revenue and cash flow growth
while limiting the near-term impact on Comcast's balance sheet and
The pending merger with TWC enables Comcast to extend its operating
strategies and technology roadmap into TWC's operations, creating the
opportunity to realize material operating cost and capital spending
efficiencies. Fitch points out that Comcast's cable-segment EBITDA
margin was nearly 500 basis points higher than the comparable TWC EBITDA
margin during the year ended 2013. Comcast's ability to successfully
establish its key operating strategies within TWC's legacy operations
creates a potential $1 billion EBITDA benefit for the combined entity.
Additionally, the national scope of the combined entities' cable
infrastructure will position the company to effectively compete for a
higher tier commercial business. Combined commercial-segment revenues
totaled approximately $5.5 billion during 2013, representing the
second-fastest growing business segment of the combined ntity. Fitch
anticipates the merger with TWC will close by the end of 2014.
Fitch estimates that approximately $73.6 billion of debt and preferred
stock was outstanding as of Dec. 31, 2013 on a pro forma basis
translating into pro forma leverage of 2.5x. The pro forma leverage
represents a modest increase relative to Comcast's actual leverage of
2.2x (Fitch calculation). Fitch expects Comcast's credit profile will
strengthen on a pro forma basis with consolidated pro forma leverage of
2.2x by year-end 2014, approaching 2x by the end of 2015 in the absence
of significant cost or operating synergies.
Comcast's liquidity position and overall financial flexibility are
strong based on Fitch's expectation that the company will continue to
generate material amounts of free cash flow (FCF). Fitch acknowledges
that Comcast's share repurchase program represents a significant use of
cash; however, Fitch believes that the company would reduce the level of
share repurchases should the operating environment materially change, in
order to maximize financial flexibility. The liquidity position is
further supported by cash on hand (which totaled $1.7 billion on a
consolidated basis as of Dec. 31, 2013) and $4.7 billion of collective
available borrowing capacity (as of Dec. 31, 2013) from Comcast's two
revolving credit facilities. Commitments under Comcast's $6.25 billion
revolver will expire during June 2017 while the commitments related to
NBCUniversal Enterprise's $1.35 billion revolver expire during March
Comcast's debt maturity profile is well-laddered and within Fitch's FCF
expectation. Maturities total approximately $1.9 billion during 2014
(including $900 million at NBCUniversal Media) excluding outstanding
commercial paper, followed by $3.4 billion during 2015.
--A positive rating action would likely coincide with Comcast achieving
and committing to a financial policy consistent with an 'A' rating,
including maintaining its leverage below 1.5x on a sustained basis.
Comcast would need to demonstrate that its operating profile will not
materially decline in the face of competition and less than robust
housing and employment conditions.
--Negative rating actions would likely coincide with discretionary
actions of Comcast's management including, but not limited to, the
company adopting a more aggressive financial strategy, or event-driven
merger and acquisition activity, that drive leverage beyond 2.5x in the
absence of a credible deleveraging plan.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 5, 2013);
--'Rating Telecom Companies' (Aug. 9, 2012).
Applicable Criteria and Related Research:
Rating Telecom Companies
Corporate Rating Methodology: Including Short-Term Ratings and Parent
and Subsidiary Linkage
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