The $1.05 billion deal to have NBCUniversal buy out the 50% of Universal Orlando currently owned by Blackstone Capital Partners won’t impact NBCU’s credit ratings by Moody’s Investors Service. Moody’s also has its rating of Universal Orlando under review for a possible upgrade.
Noting that the purchase will be financed with borrowings under NBCU’s existing revolver and a $400 million subordinated loan from Comcast Corporation, Moody’s said “the transaction could result in a range of potential debt capital structures, leverage and rating outcomes for Universal Orlando and NBCU over the next 12 months.”
“However, we believe that even under the most credit negative scenarios, whereby NBCU finances the purchase with debt and legally assumes all of Universal Orlando’s debt, that NBCU has the ability to absorb the impact, and within 12 months return leverage to targets that are reasonable for current credit ratings,” stated Moody’s Sr. VP Neil Begley.
Moody’s said it believes full ownership of Universal Orlando by NBCU, which owns or receives license fees for other Universal branded theme parks around the world, rather than the 50-50 joint venture clarifies the long-term strategic importance of the company to NBCU.
Just how NBCU deals with Universal Orlando’s debt once it is the 100% owner will be the primary factor in determining the financial impact on NBCU, the ratings agency said. Moody’s believes that the most onerous credit scenario would be for NBCU to refinance all of the Universal Orlando debt at the NBCU level. While NBCU will have access to the Universal Orlando cash flows, and would save interest cost on the existing outstanding debt, such a move would result in slightly higher leverage and interest costs overall at NBCU. “Moody’s believes that even in this scenario, the higher leverage and interest cost would be manageable within the current rating since it won’t raise NBCU’s leverage metrics materially,” said the Moody’s analysis.