TEXT-S&P: Comcast, Disney ratings are unchanged
July 11 - Standard & Poor's said today that the Comcast Corp. (BBB+/Stable/A-2) and The Walt Disney Co. (A/Stable/A-1) ratings and outlook are unaffected by the announced agreement by its NBCUniversal unit to sell its 15.8% interest in A&E Television Networks LLC for $3.025 billion in cash. The other owners in A&E include Hearst Corp. (unrated) and Walt Disney Co., which each own approximately 42%. Given Comcast Corp.'s relatively small stake in A&E, we did not view this as a strategic investment for them, and therefore it has no effect on Comcast's overall "strong" business risk assessment. Moreover, since Comcast held a minority, noncontrolling stake in A&E, it did not contribute significantly to the company's overall financial profile. Proceeds received from this transaction would provide a partial funding source for Comcast's increased ownership in NBCUniversal, which is currently owned 49% by General Electric. Under the ownership agreement, we expect Comcast's stake in NBCUniversal to rise to nearly full ownership between 2014 and 2019, which could result in leverage increasing to the high-2x area, from 2.3x as of March 31, 2012. Disney's move to raise its stake in A&E does not affect its rating, despite Disney's leverage that is currently near our 2x threshold for its 'A' rating. We assume that the issuance of debt at the A&E level will be supported by a reduction in cash distributions to its shareholders. Although we have been including dividends from minority investments in our calculation of Disney's EBITDA and leverage, we expect the transaction will minimally increase leverage. We anticipate that Disney's discretionary cash flow, EBITDA growth, and ability to moderate its pace of share repurchases will enable it to neutralize leverage pressure over the next three to five years. We view A&E as a logical and strategic investment for Disney that complements its existing business profile.