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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.


--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.


--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 ''.

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

Additional Disclosure

Solicitation Status


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