TEXT - Fitch rates Comcast Corp notes 'BBB+'
Nov 29 - Fitch Ratings has assigned a 'BBB+' rating to Comcast Corporation's (Comcast) senior unsecured notes maturing 2061. Proceeds from the offering are expected to be used for general corporate purposes. 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 Sept. 30, 2012, Comcast had approximately $38.6 billion of debt outstanding, including $9.7 billion outstanding at NBCUniversal Media, LLC (NBCUniversal). The issuance is in line with Comcast's overall financial strategy and Fitch's expectations. Comcast's leverage declined to 1.94x on a consolidated basis as of the LTM period ended Sept. 30, 2012 when compared to 2.11x as of year-end 2011 and 2.35x for the LTM period ended Sept. 30, 2011. The company is operating at the lower end of Comcast's leverage target ranging between 2x and 2.5x. NBCUniversal's leverage was 2.4x (2.9x pro forma for NBCUniversal's $2 billion issuance of senior notes during October 2012). Both leverage metrics are within Fitch's expectations given the current ratings. After considering NBCUniversal's recent debt issuance, Fitch expects consolidated debt levels will remain relatively constant during 2013. On a consolidated basis, Fitch anticipates Comcast's leverage metric will remain at the lower end of the company's leverage target and approach 1.9x as of year-end 2013, while NBCUniversal's leverage metric will range between 2.5x and 2.75x by year-end 2013. Fitch believes Comcast's strong operating profile and solid free cash flow metrics afford the company a high degree of financial flexibility at the current rating category. The company generated approximately $8.3 billion of consolidated free cash flow (defined as cash provided by operating activities less capital expenditures and dividends) during the LTM period ended Sept. 30, 2012. Fitch anticipates that the company will consistently generate consolidated free cash flow in excess of $7 billion annually after considering higher cash taxes due to the absence of further economic stimulus legislation. Fitch does not expect any material change to Comcast's capital allocation strategy over the near term. The company maintains 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. Cash generated from the cable business will be used to return cash to Comcast shareholders while cash generated at NBCUniversal will build-up in anticipation of obligations related to GE's ownership put rights. Cash returned to shareholders (dividends plus buybacks) totaled $3.4 billion or approximately 48% of cash flow before dividends during the first nine months of 2012. As of Sept. 30, 2012 approximately $4.25 billion of capacity remains under Comcast's share repurchase authorization. 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 free cash flow. 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 $8.9 billion on a consolidated basis as of Sept. 30, 2012) and available borrowing capacity from Comcast's $6.25 billion revolver (of which approximately $5.8 billion was available for borrowing). Comcast's revolver will expire during June, 2017. Comcast's debt maturity profile on a consolidated basis is well laddered and within Fitch's free cash flow expectation for the company. Scheduled maturities during 2013 total approximately $2.4 billion followed by $2 billion during 2014 including $907 million at NBCUniversal. Fitch's ratings incorporate Comcast's strong competitive position as one of the largest video, high-speed Internet and phone providers to residential and business customers in the United States and the company's compelling subscriber clustering profile with operations in 39 states and the District of Columbia. In Fitch's view, NBCUniversal's size, scale, leading brand positions and diversity of operations and business risk as one of the world's most prominent media and entertainment companies, lowers the business risk attributable to Comcast's credit profile and creates new avenues for revenue and cash flow growth while limiting the near-term impact on Comcast's balance sheet and credit profile. What Could Trigger a Positive Rating Action: --Positive rating action would likely coincide with Comcast committing to reduce leverage below 2x on a sustained basis after considering Comcast's potential funding obligations related to GE's ownership put rights related to NBCUniversal. --Comcast would need to demonstrate that its operating profile will not materially decline in the face of competition and poor housing and employment conditions. What Could Trigger a Negative Rating Action: --Negative rating actions are more likely to coincide with discretional actions of Comcast's management including, but not limited to, the company adopting a more aggressive financial strategy or an event-driven merger, and acquisition activity that drive leverage beyond 2.75x in the absence of a credible de-leveraging plan.
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