Welcome!

News Feed Item

Fitch Affirms Comcast's IDR at 'A-'; Time Warner Cable Placed on Rating Watch Positive

Fitch Ratings has affirmed the 'A-' Issuer Default Ratings (IDRs) assigned to Comcast Corporation (Comcast) and its wholly owned subsidiaries included in Comcast's cross-guaranty structure. Fitch has also affirmed the 'A-' IDR assigned to NBCUniversal Enterprise, Inc. (Enterprise). The Rating Outlook on all of these ratings remains Stable.

Approximately $48.6 billion of Comcast's consolidated debt, including $11.2 billion outstanding at NBCUniversal as of Dec. 31, 2013 is affected by Fitch's action.

Fitch has placed the 'BBB' IDR assigned to Time Warner Cable, Inc. (TWC) and certain of its subsidiaries on Rating Watch Positive. Approximately $25 billion of debt outstanding at TWC as of Dec. 31, 2013 is affected by Fitch's action.

Fitch's action follows the company's announcement that it has entered into a definitive agreement for TWC to merge with Comcast whereby Comcast will acquire 100% of TWC's outstanding common equity for approximately $45.2 billion in an all-stock transaction.

KEY RATING DRIVERS

--Comcast's 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 segment business.

--The all-stock consideration structure of the merger with TWC is not expected to have a material impact on Comcast's credit protection measures.

--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.

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.

The TWC rating action reflects the strong strategic tie and ownership resulting from the merger closing. As in prior acquisitions, Fitch would expect that Comcast would ultimately include the TWC debt in its cross guaranty structure post-closing, which effectively renders the TWC indebtedness to rank pari passu with the debt currently included in the cross guaranty, and provides sound rationale for linking the ratings. As a result of the successful completion of the merger and anticipated inclusion in the existing guaranty structure is expected to lead to a two notch upgrade in TWC's ratings.

The 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 entity.

FCF (defined as cash flow from operations less capital expenditures and dividends) amounted to approximately $7.4 billion during the year-ended Dec. 31, 2013 on a pro forma basis. Going forward Fitch anticipates that the company will consistently generate consolidated FCF in excess of 10% of consolidated revenues.

In Fitch's estimation, the company will continue to maintain an appropriate balance between returning capital to shareholders, in the form of dividends and share repurchases, repaying debt, and investing in the strategic needs of its business. Fitch's expectation that shareholder returns as a percentage of pre-dividend cash flow will increase over the medium term is incorporated into the ratings. Comcast previously indicated that share repurchases should total $3 billion during 2014 as part of a $7.5 billion share repurchase authorization. Furthermore, the company expects to expand the share repurchase authorization by an additional $10 billion upon closing of the merger with TWC.

Comcast's liquidity position and overall financial flexibility are strong owing to Fitch's expectation that the company will continue to generate material amounts of 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 2018.

Comcast's debt maturity profile is well laddered and within Fitch's FCF expectation for the company. 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.

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, 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 credit profile.

NBCUniversal's portfolio of leading cable networks as well as the growing importance of its theme parks business are key considerations supporting Fitch's ratings and a strength of the company's credit profile. Fitch considers cable networks one of the strongest subsectors in the media and entertainment industry, providing NBCUniversal with a revenue base largely consisting of stable, recurring and high-margin affiliate fee revenue generated from multichannel video programming distributors as well as a significant source of NBCUniversal's FCF generation. Fitch acknowledges that increasing programming expense may weigh on cable network operating margins.

The company's strategy to continually invest in new attractions within its theme park business drive strong attendance and per capita spending metrics, which translate into high-margin, recurring cash flows.

Outside of a change to Comcast's financial strategy or event-driven merger and acquisition activity, rating concerns center on Comcast's ability to adapt to the evolving operating environment while maintaining its relative competitive position, given the challenging competitive environment and soft housing and employment trends. Considering the mature nature of video services and growing penetration of high-speed data services, Comcast's ability to grow consumer revenues while maintaining operating margins remains a key rating consideration.

RATING SENSITIVITIES:

--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.

Fitch has affirmed the following ratings with a Stable Outlook:

Comcast Corporation

--IDR at 'A-';

--Short-term IDR at 'F2';

--Commercial Paper at 'F2';

--Senior unsecured debt at 'A-';

--$6.25 billion revolving bank facility (co-borrower with Comcast Cable Communications LLC) at 'A-'.

Comcast Holdings Corporation

--IDR at 'A-';

--Subordinated exchangeable notes at 'BBB'.

Comcast Cable Communications, LLC

--IDR at 'A-';

--Senior unsecured debt at 'A-';

--$6.25 billion revolving bank facility (co-borrower with Comcast) at 'A-'.

Comcast Cable Holdings, LLC

--IDR at 'A-';

--Senior unsecured debt at 'A-'.

Comcast MO Group, Inc.

--IDR at 'A-';

--Senior unsecured debt at 'A-'.

Comcast MO of Delaware, LLC

--IDR at 'A-'.

NBC Universal Media, LLC

--IDR at 'A-';

--Senior unsecured debt at 'A-'.

NBCUniversal Enterprise, Inc.

--IDR at 'A-';

--Senior unsecured debt at 'A-';

--$1.35 billion revolving bank facility at 'A-';

--Series A preferred stock at 'BBB';

--Short-term IDR at 'F2';

--Commercial Paper at 'F2'.

Fitch has placed the following ratings on Rating Watch Positive:

Time Warner Cable, Inc.

--IDR of 'BBB'.

--Senior Unsecured debt of 'BBB'.

Time Warner Cable Enterprises LLC

--IDR of 'BBB'.

--Senior Unsecured debt of 'BBB'.

Fitch affirmed the following ratings:

Time Warner Cable, Inc.

--F-2 Short Term IDR

--F-2 Commercial Paper Rating

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

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682323

Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=820564

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
With more than 30 Kubernetes solutions in the marketplace, it's tempting to think Kubernetes and the vendor ecosystem has solved the problem of operationalizing containers at scale or of automatically managing the elasticity of the underlying infrastructure that these solutions need to be truly scalable. Far from it. There are at least six major pain points that companies experience when they try to deploy and run Kubernetes in their complex environments. In this presentation, the speaker will d...
While DevOps most critically and famously fosters collaboration, communication, and integration through cultural change, culture is more of an output than an input. In order to actively drive cultural evolution, organizations must make substantial organizational and process changes, and adopt new technologies, to encourage a DevOps culture. Moderated by Andi Mann, panelists discussed how to balance these three pillars of DevOps, where to focus attention (and resources), where organizations might...
The deluge of IoT sensor data collected from connected devices and the powerful AI required to make that data actionable are giving rise to a hybrid ecosystem in which cloud, on-prem and edge processes become interweaved. Attendees will learn how emerging composable infrastructure solutions deliver the adaptive architecture needed to manage this new data reality. Machine learning algorithms can better anticipate data storms and automate resources to support surges, including fully scalable GPU-c...
When building large, cloud-based applications that operate at a high scale, it's important to maintain a high availability and resilience to failures. In order to do that, you must be tolerant of failures, even in light of failures in other areas of your application. "Fly two mistakes high" is an old adage in the radio control airplane hobby. It means, fly high enough so that if you make a mistake, you can continue flying with room to still make mistakes. In his session at 18th Cloud Expo, Le...
Machine learning has taken residence at our cities' cores and now we can finally have "smart cities." Cities are a collection of buildings made to provide the structure and safety necessary for people to function, create and survive. Buildings are a pool of ever-changing performance data from large automated systems such as heating and cooling to the people that live and work within them. Through machine learning, buildings can optimize performance, reduce costs, and improve occupant comfort by ...
As Cybric's Chief Technology Officer, Mike D. Kail is responsible for the strategic vision and technical direction of the platform. Prior to founding Cybric, Mike was Yahoo's CIO and SVP of Infrastructure, where he led the IT and Data Center functions for the company. He has more than 24 years of IT Operations experience with a focus on highly-scalable architectures.
The explosion of new web/cloud/IoT-based applications and the data they generate are transforming our world right before our eyes. In this rush to adopt these new technologies, organizations are often ignoring fundamental questions concerning who owns the data and failing to ask for permission to conduct invasive surveillance of their customers. Organizations that are not transparent about how their systems gather data telemetry without offering shared data ownership risk product rejection, regu...
CI/CD is conceptually straightforward, yet often technically intricate to implement since it requires time and opportunities to develop intimate understanding on not only DevOps processes and operations, but likely product integrations with multiple platforms. This session intends to bridge the gap by offering an intense learning experience while witnessing the processes and operations to build from zero to a simple, yet functional CI/CD pipeline integrated with Jenkins, Github, Docker and Azure...
René Bostic is the Technical VP of the IBM Cloud Unit in North America. Enjoying her career with IBM during the modern millennial technological era, she is an expert in cloud computing, DevOps and emerging cloud technologies such as Blockchain. Her strengths and core competencies include a proven record of accomplishments in consensus building at all levels to assess, plan, and implement enterprise and cloud computing solutions. René is a member of the Society of Women Engineers (SWE) and a m...
Dhiraj Sehgal works in Delphix's product and solution organization. His focus has been DevOps, DataOps, private cloud and datacenters customers, technologies and products. He has wealth of experience in cloud focused and virtualized technologies ranging from compute, networking to storage. He has spoken at Cloud Expo for last 3 years now in New York and Santa Clara.
Enterprises are striving to become digital businesses for differentiated innovation and customer-centricity. Traditionally, they focused on digitizing processes and paper workflow. To be a disruptor and compete against new players, they need to gain insight into business data and innovate at scale. Cloud and cognitive technologies can help them leverage hidden data in SAP/ERP systems to fuel their businesses to accelerate digital transformation success.
Containers and Kubernetes allow for code portability across on-premise VMs, bare metal, or multiple cloud provider environments. Yet, despite this portability promise, developers may include configuration and application definitions that constrain or even eliminate application portability. In this session we'll describe best practices for "configuration as code" in a Kubernetes environment. We will demonstrate how a properly constructed containerized app can be deployed to both Amazon and Azure ...
Poor data quality and analytics drive down business value. In fact, Gartner estimated that the average financial impact of poor data quality on organizations is $9.7 million per year. But bad data is much more than a cost center. By eroding trust in information, analytics and the business decisions based on these, it is a serious impediment to digital transformation.
Digital Transformation: Preparing Cloud & IoT Security for the Age of Artificial Intelligence. As automation and artificial intelligence (AI) power solution development and delivery, many businesses need to build backend cloud capabilities. Well-poised organizations, marketing smart devices with AI and BlockChain capabilities prepare to refine compliance and regulatory capabilities in 2018. Volumes of health, financial, technical and privacy data, along with tightening compliance requirements by...
Predicting the future has never been more challenging - not because of the lack of data but because of the flood of ungoverned and risk laden information. Microsoft states that 2.5 exabytes of data are created every day. Expectations and reliance on data are being pushed to the limits, as demands around hybrid options continue to grow.