CHICAGO--(BUSINESS WIRE)--Fitch Ratings does not expect Comcast Corporation's (Comcast) and NBCUniversal Enterprise, Inc.'s (NBCU) Issuer Default Ratings (IDRs) to be affected by today's announcement of NBCU's acquisition of DreamWorks Animation SKG, Inc. (DreamWorks).
Fitch believes DreamWorks Animation's portfolio of intellectual property (IP) and franchise properties strengthens NBCUniversal's family entertainment programming and the ability to leverage the IP across the company's lines of business (film, TV, theme parks, and consumer products) provides a long-term competitive advantage to NBCU.
The acquisition values DreamWorks' equity at approximately $3.8 billion, and the total enterprise value, including assumed debt, is approximately $4.1 billion. The transaction is anticipated to close at the end of 2016 and is subject to the customary regulatory approvals and closing conditions.
Assuming Comcast funds the acquisition with debt, its pro forma leverage at Dec. 31, 2015 was 2.3x, up modestly from actual leverage of 2.1x. Fitch believes Comcast's credit profile will be relatively consistent during 2016 and that leverage will be in this same range as of year-end 2016 and remain at or near that leverage during the current ratings horizon.
Comcast's capital allocation policy is expected to remain relatively consistent and focused on returning capital to its shareholders while continuing to invest in the strategic needs of its business. Fitch expects that share repurchases will total approximately $5 billion during 2016, in line with management guidance (which was affirmed on the acquisition announcement).
As of March 31, 2016 Comcast had approximately $56.4 billion of debt and preferred stock outstanding, including $12.8 billion outstanding at NBCUniversal Media, LLC (NBCUniversal) and $5.2 billion outstanding at NBCUniversal Enterprise.
Comcast's liquidity position and overall financial flexibility are strong as Fitch expects the company will continue to generate material amounts of FCF. Comcast generated approximately $7.6 billion of FCF (cash flow from operations less capex and dividends) during the LTM ended March 31, 2016. Fitch anticipates that going forward the company will consistently generate consolidated FCF in excess of $7 billion.
The liquidity position is further supported by cash on hand (which totaled approximately $5.6 billion on a consolidated basis as of March 31, 2016) and $6.9 billion of collective available borrowing capacity (as of March 31, 2016) 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. The credit facilities provide a liquidity back-stop to the company's two commercial paper (CP) programs. Comcast maintains a $6.25 billion CP program (none outstanding as of March 31, 2016) while NBCUniversal Enterprise has established a $1.35 billion CP program under which approximately $450 million was outstanding as of March 31, 2016.
Comcast's debt maturity profile is well-laddered and within Fitch's FCF expectation. The company's maturities total approximately $2.5 billion during 2016 (excluding the current portion of the term loan) followed by $2.6 billion, and $4.1 billion during 2017 and 2018 respectively.
RATING SENSITIVITIES
A positive rating action would likely coincide with Comcast committing to and achieving 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.
Negative rating actions would likely coincide with discretionary actions of Comcast's management including, but not limited to, 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 currently rates Comcast as follows:
Comcast Corporation
--Long-term IDR 'A-';
--Senior unsecured debt 'A-'
--$6.25 billion revolving bank facility (co-borrower with Comcast Cable Communications LLC) 'A-';
--Short-term IDR 'F2';
--Commercial Paper 'F2'.
Comcast Holdings Corporation
--IDR 'A-';
--Subordinated exchangeable notes 'BBB'.
Comcast Cable Communications, LLC
--IDR 'A-';
--Senior unsecured debt 'A-';
--$6.25 billion revolving bank facility (co-borrower with Comcast) 'A-'.
Comcast Cable Holdings, LLC
--IDR 'A-';
--Senior unsecured debt 'A-'.
Comcast MO Group, Inc.
--IDR 'A-';
--Senior unsecured debt 'A-'.
Comcast MO of Delaware, LLC
--IDR 'A-'.
NBC Universal Media, LLC
--IDR 'A-';
--Senior unsecured debt 'A-'.
NBCUniversal Enterprise, Inc.
--IDR 'A-';
--Senior unsecured debt 'A-';
--$1.35 billion revolving bank facility 'A-';
--Series A preferred stock 'BBB';
--Short-term IDR 'F2';
--Commercial paper 'F2'.
Date of Relevant Rating Committee: Sept. 28, 2015
Additional information is available at 'www.fitchratings.com'.
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