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Fitch Assigns 'BBB+' Rating to Comcast Notes; Maintain Stable Outlook

Posted on: Tuesday, 11 July 2006, 18:00 CDT

Fitch Ratings has assigned a 'BBB+' rating to Comcast Corporation's (Comcast) $2.25 billion offering of senior unsecured notes consisting of $1.25 billion of floating rate notes due July 2009 and $1.0 billion of senior notes due January 2017. The proceeds from the offering are expected to be used for general corporate purposes. The Rating Outlook for all of Comcast's ratings is Stable. As of March 31, 2006, Comcast had approximately $24.1 billion of debt outstanding.

The current offering is consistent with Fitch's expectation that total debt at Comcast will increase during 2006 to allow for the financing of Comcast's acquisition of certain assets from Adelphia Communications Corporation and the acquisition of Susquehanna Cable. Comcast's leverage metric as of the end of the first quarter of 2006 was 2.79 times (x). Fitch expects that the pace of credit metric improvement will slow during 2006 as the company's financial policy continues to shift away from debt reduction to focus on returning capital to shareholders. Fitch expects that leverage as of year-end 2006 will improve modestly and approach 2.6x.

On June 21, 2006, Comcast and Adelphia entered into Amendment Number Two to the Purchase Agreement entered into on April 20, 2005. On June 27, the US Bankruptcy Court for the Southern District of New York approved the amendment to the purchase agreements. Fitch expects that the proposed sale will be approved by the FCC later in this week and the sale will close by the end of July. Pursuant to the terms of the amendment, the assets being acquired and the total consideration paid by Comcast remain unchanged. However the sale of assets, exclusive of Adelphia's sale of its ownership interests in two joint ventures with Comcast, to Comcast will no longer be subject to Adelphia creditors approving a plan of reorganization under Chapter 11 of the bankruptcy code. The remaining assets will be sold to Comcast in accordance with sections 105, 363 and 365 of the bankruptcy code.

Fitch's ratings continue to reflect Comcast's competitive position as the largest multiple systems operator (MSO), and Fitch's belief that the company is currently better positioned to maintain market share than the DBS and RBOC competitors. From Fitch's perspective Comcast is well positioned to generate solid operating metrics, sustainable EBITDA and free cash flow growth over Fitch's rating horizon in an operating environment that Fitch anticipates will be increasingly competitive. Fitch believes that Comcast is positioned to capitalize on its early mover market position by offering unique and interactive triple play product services thereby enhancing its competitive position. Additionally, Comcast's scale uniquely positions the company to lower its programming costs and drive further operating cost efficiencies within its cable plant as well as providing internally generated content and entering into key investments or partnerships with content providers and vendors, which affords Comcast a competitive advantage.

The competitive threat posed by the DBS operators, ILECs and new industry participants provide the greatest threat to de-stabilize Comcast's credit profile. Fitch believes that RBOCs' deployment plans for its fiber build will not pose a significant competitive threat to Comcast during 2006; however the competitive risk will become more meaningful during 2007 and 2008. Fitch believes that the Comcast subscribers most susceptible to a competitive offer from the telephone companies will be subscribers that take only the basic tier video services, and that it is critical for the company to capitalize on its window of opportunity relative to the RBOCs deployment of its fiber to increase the level of subscribers who take multiple service products.

Fitch's Stable Rating Outlook reflects Fitch's expectation for Comcast to maintain credit quality and financial flexibility indicative of its 'BBB+' rating category, the continuation of strong operating metrics and the unfettered integration of the Adelphia, Time Warner Cable and Susquehanna Cable subscribers. A more aggressive financial policy such as debt financed share repurchases or special dividends, or an erosion of the company's operating metrics due to competitive factors could lead to a revision of the company's Rating Outlook.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.

Source: Business Wire

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