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
--'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
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
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.
--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
--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
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