SYS-CON MEDIA Authors: Pat Romanski, Elizabeth White, PagerDuty Blog, Michael Jannery, Liz McMillan

News Feed Item

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.

KEY RATING DRIVERS

--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.

RATING SENSITIVITIES:

--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 'www.fitchratings.com'.

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

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682323

Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=820564

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
15th Cloud Expo, which took place Nov. 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA, expanded the conference content of @ThingsExpo, Big Data Expo, and DevOps Summit to include two developer events. IBM held a Bluemix Developer Playground on November 5 and ElasticBox held a Hackathon on November 6. Both events took place on the expo floor. The Bluemix Developer Playground, for developers of all levels, highlighted the ease of use of Bluemix, its services and functionalit...
"ElasticBox is an enterprise company that makes it very easy for developers and IT ops to collaborate to develop, build and deploy applications on any cloud - private, public or hybrid," stated Monish Sharma, VP of Customer Success at ElasticBox, in this SYS-CON.tv interview at DevOps Summit, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
"For the past 4 years we have been working mainly to export. For the last 3 or 4 years the main market was Russia. In the past year we have been working to expand our footprint in Europe and the United States," explained Andris Gailitis, CEO of DEAC, in this SYS-CON.tv interview at Cloud Expo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
The Internet of Things will greatly expand the opportunities for data collection and new business models driven off of that data. In her session at @ThingsExpo, Esmeralda Swartz, CMO of MetraTech, discussed how for this to be effective you not only need to have infrastructure and operational models capable of utilizing this new phenomenon, but increasingly service providers will need to convince a skeptical public to participate. Get ready to show them the money!
The Industrial Internet revolution is now underway, enabled by connected machines and billions of devices that communicate and collaborate. The massive amounts of Big Data requiring real-time analysis is flooding legacy IT systems and giving way to cloud environments that can handle the unpredictable workloads. Yet many barriers remain until we can fully realize the opportunities and benefits from the convergence of machines and devices with Big Data and the cloud, including interoperability, ...
At 15th Cloud Expo, Shrikant Pattathil, Executive Vice President at Harbinger Systems, demos a video delivery platform that helps you do interactive videos. He discusses how Harbinger is accomplishing it in the cloud world, the problems they faced and the choices they made to get around these problems.
“DevOps is really about the business. The business is under pressure today, competitively in the marketplace to respond to the expectations of the customer. The business is driving IT and the problem is that IT isn't responding fast enough," explained Mark Levy, Senior Product Marketing Manager at Serena Software, in this SYS-CON.tv interview at DevOps Summit, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
“The year of the cloud – we have no idea when it's really happening but we think it's happening now. For those technology providers like Zentera that are helping enterprises move to the cloud - it's been fun to watch," noted Mike Loftus, VP Product Management and Marketing at Zentera Systems, in this SYS-CON.tv interview at Cloud Expo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
The 3rd International Internet of @ThingsExpo, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that its Call for Papers is now open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
Want to enable self-service provisioning of application environments in minutes that mirror production? Can you automatically provide rich data with code-level detail back to the developers when issues occur in production? In his session at DevOps Summit, David Tesar, Microsoft Technical Evangelist on Microsoft Azure and DevOps, will discuss how to accomplish this and more utilizing technologies such as Microsoft Azure, Visual Studio online, and Application Insights in this demo-heavy session.
Entuity®, a provider of enterprise-class network management solutions, today announced that it solidifies its position as a market leader through global enterprise customer acquisitions and a refined channel strategy. In 2014, Entuity increased new license revenues in EMEA by over 75 percent, and LATAM by over 125 percent as customers embraced Entuity for its highly automated solution and unified architecture. Entuity’s refined channel strategy focuses on even deeper strategic alignment with ke...
We are all here because we are sold on the transformative promise of The Cloud. But what good is all of this ephemeral, on-demand infrastructure if your usage doesn't actually improve the agility and speed of your business? How must Operations adapt in order to avoid stifling your Cloud initiative? In his session at DevOps Summit, Damon Edwards, co-founder and managing partner of the DTO Solutions, will highlight the successful organizational, process, and tooling patterns of high-performing c...
The 4th International DevOps Summit, co-located with16th International Cloud Expo – being held June 9-11, 2015, at the Javits Center in New York City, NY – announces that its Call for Papers is now open. Born out of proven success in agile development, cloud computing, and process automation, DevOps is a macro trend you cannot afford to miss. From showcase success stories from early adopters and web-scale businesses, DevOps is expanding to organizations of all sizes, including the world's large...
Cloud Expo 2014 TV commercials will feature @ThingsExpo, which was launched in June, 2014 at New York City's Javits Center as the largest 'Internet of Things' event in the world.
“We help people build clusters, in the classical sense of the cluster. We help people put a full stack on top of every single one of those machines. We do the full bare metal install," explained Greg Bruno, Vice President of Engineering and co-founder of StackIQ, in this SYS-CON.tv interview at 15th Cloud Expo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.