NBC Universal is raising $5.1 billion from a multi-tranche bond sale and Moody’s Investors Service has assigned a Baa2 rating to the new issues – the same as the existing investment-grade rating for the company’s debt. The proceeds will be used to fund a cash distribution to General Electric when Comcast acquires a majority stake in NBCU.
The ratings announcement from Moody’s spelled out details on the balance sheet that NBCU will have once the Comcast-GE transaction closes. The bond sale began as Vivendi announced that it has sold part of its NBCU stake to GE, with the rest to be sold when the Comcast transaction closes.
Here is the Moody’s rating analysis:
“Moody’s Investors Service assigned a Baa2 senior unsecured rating to NBC Universal, Inc.’s (“NBCU”) proposed new notes issuance. The new notes are anticipated to be split in multiple tranches. Net proceeds from the bond offering, together with the remaining proceeds from the notes issuance in April 2010 and, if necessary, borrowings under a new three year credit agreement, will be used to make a cash distribution to General Electric Company (“GE” — Aa2 senior unsecured rating) upon the closing of the pending joint venture deal with Comcast Corporation (“Comcast” — Baa1 senior unsecured rating). The rating outlook for NBCU is stable.
The new notes will be senior unsecured and unsubordinated obligations and will rank equally with the company’s existing unsecured indebtedness. The notes will not be guaranteed by any of NBCU’s subsidiaries or by GE or Comcast. As part of the joint venture, NBCU will incur total debt of $9.1 billion, consisting of $4 billion of senior unsecured notes issued in April 2010, the proposed new notes and, if necessary, an amount under its bank facility. Borrowings under the term loan bank facility will be reduced by the amount issued under the new bond offering. Additionally, the company will have access to a $750 million revolving credit facility upon closing of the joint venture transaction.
NBCU’s ratings are based on the combined entity’s (the cable networks of NBCU and Comcast) iconic brands (USA, NBC, Universal, and many others), large portfolio of cable networks, significant scale (2009 pro forma revenues of $17.5 billion) and broad geographic reach of the NBC network.
The rating is supported by strong and consistent cash flow generation, and a governance-based limitation on the amount of incremental debt the company can incur (2.75x based on management’s calculation of debt-to-EBITDA leverage) which we believe is prudently moderate. Moody’s expects that leverage will dip to as low as around 1.5x leading up to the GE buyout windows, at which time debt will be reloaded to the 2.75x (reported leverage) ceiling. We anticipate that over the rating horizon, average leverage will be maintained at around 3x when we include Moody’s standard adjustments and guarantees.”