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Feb 28 - Fitch Ratings has assigned the following ratings to NBCUniversal Enterprise, Inc.'s (Enterprise) debt and preferred stock to be issued in connection with Comcast Corporation's (Comcast) redemption of General Electric Corporation's (GE) ownership interest in NBCUniversal: --'BBB+' Issuer Default Rating; --'BBB+' rating assigned to Enterprise's five-year, $1.35 billion amended and restated revolving credit agreement; --'BBB+' rating assigned to the company's senior unsecured notes totaling $4 billion; --'BBB-' rating assigned to Enterprise's $725 million series A preferred stock. Each of the ratings has a Positive Rating Outlook. The senior notes and preferred stock will be issued by Enterprise to a subsidiary of GE as part of the consideration paid to GE in connection with Comcast's agreement to acquire GE's remaining 49% ownership interest in NBCUniversal, LLC (Redemption Transaction). Proceeds from the credit facility together with existing cash on hand and cash funded through a combination of Comcast commercial paper and existing credit facility will fund the remainder of the Redemption Transaction. Upon the closing of the Redemption Transaction, Enterprise will be an indirect, consolidated subsidiary of Comcast whose primary assets are its common and preferred ownership interests in NBCUniversal, LLC (the parent company of NBCUniversal Media, LLC). KEY RATING DRIVERS --The senior note issuance, along with the issuance of preferred stock and the amended and restated credit facility is in line with Fitch's expectations related to the funding of the Redemption Transaction. --Enterprise's senior unsecured notes and revolving credit facility will be guaranteed by Comcast and the cable holding company subsidiaries that guarantee Comcast's senior indebtedness. -- Expected cash distributions on the preferred units of NBCUniversal, LLC held by Enterprise will be more than sufficient to cover Enterprise's debt service, dividend payments on its preferred stock, and tax expenses. --Enterprise's ratings will be linked to Comcast's. --Comcast's pending acquisition of the remaining 49% ownership stake in NBCUniversal it does not own from General Electric Corporation (GE) is neutral to Comcast's current ratings. Enterprise's senior unsecured notes and the credit facility will be guaranteed by Comcast and by Comcast's cable holding companies that guarantee Comcast's senior indebtedness and will rank pari passu with the senior unsecured indebtedness issued by Comcast, the existing cable guarantors, and NBCUniversal Media, LLC. In addition the strong strategic tie and ownership consolidation provide sound rationale for linking the ratings. The credit facility guaranty will include financial covenants substantially similar to those included in Comcast's $6.25 billion credit facility due June 2017. Neither NBCUniversal, LLC nor NBCUniversal Media, LLC will guarantee Enterprise's senior unsecured notes or the credit facility. Enterprise's preferred stock is transferrable and will pay a cumulative fixed-rate dividend. If transferred to a third party unaffiliated with GE, the holder will have the right to put the preferred stock at par on the later of the seventh anniversary of the date of original issuance and the third anniversary of the date on which the holder purchased the shares from GE or its affiliate. The preferred stock will not benefit from a Comcast or NBCUniversal Media, LLC guaranty and is structurally subordinated to Enterprise's senior unsecured indebtedness. NBCUniversal Media's portfolio of leading cable networks is a key consideration supporting Fitch's ratings and a key strength of the company's credit profile. Fitch considers cable networks one of the strongest subsectors in the media and entertainment industry, providing NBCUniversal Media 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 Media's free cash flow (FCF) generation. Fitch acknowledges that increasing programming expense will weigh on cable network operating margins. Within NBCUniversal, rating concerns center on the secular issues challenging NBCUniversal's Broadcast Television segment, including time-shifting technologies and Internet-based content, as well as the cyclicality of advertising revenues. Fitch believes that on a total company basis NBCUniversal generates less than half of its revenues from advertising - in line with its media peer group. The operating margins generated by NBCUniversal's Broadcast Television segment lag its peer group. The company believes that improved programming and scheduling can improve operating margins. While the Filmed Entertainment business has a level of volatility, Fitch believes there is sufficient capacity within NBCUniversal's current ratings to accommodate the 'hit-natured' fluctuation of the Filmed Entertainment segment operating profile. Fitch believes Comcast has sufficient capacity within the current ratings to accommodate the modest increase in leverage expected in connection with the redemption of GE's ownership interest. The Redemption Transaction is viewed as a positive event because it provides Comcast with unfettered access to NBCUniversal's strong cash flow generation and removes the ownership overhang from Comcast's credit profile. However, Comcast's redemption of GE's ownership interest in NBCUniversal does not change the company's or NBCUniversal's operating profile. Comcast's leverage increases to 2.4x pro forma for the transaction from an estimated 2x as of year-end 2012. Fitch anticipates consolidated leverage to improve to 2.2x by year-end 2013 and strengthen to 2x by the end of 2014. The Positive Outlook reflects the foreseen improvement of Comcast's credit protection metrics over the near term along with the more conservative leverage target ranging between 2x and 1.5x adopted by management. In Fitch's opinion, the company's strong cable operating profile along with the margin improvement opportunities within NBCUniversal's broadcasting segment and modest debt reduction will enable Comcast to drive leverage within its new target during the current ratings horizon. 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 and dividends represent 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 $11 billion on a consolidated basis as of Dec. 31, 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 FCF expectation for the company. Scheduled maturities during 2013 total approximately $2.4 billion followed by $2 billion during 2014 including approximately $900 million at NBCUniversal. RATING SENSITIVITIES: --Positive rating action would likely coincide with Comcast achieving leverage below 2x 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 an event-driven merger and acquisition activity, that drive leverage beyond 2.75x in the absence of a credible de-leveraging plan. Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable Criteria and Related Research: --'Corporate Rating Methodology' (Aug.8, 2012); --'Parent and Subsidiary Rating Linkage (Fitch's Approach to Rating Entities Within a Corporate Group Structure)' (Aug. 8, 2012); --'Rating Telecom Companies' (Aug. 9, 2012). Applicable Criteria and Related Research Rating Telecom Companies Parent and Subsidiary Rating Linkage Corporate Rating Methodology
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