NBC Universal sold $4 billion in senior notes


In a move related to its pending merger with Comcast, NBC Universal priced an offering of $4 billion aggregate principal amount of senior unsecured notes. The bond sale was announced by NBCU’s current parent company, General Electric.

The notes consist of the following tranches:

$1 billion aggregate principal amount of 3.65% senior notes due 2015
$2 billion aggregate principal amount of 5.15% senior notes due 2020
$1 billion aggregate principal amount of 6.40% senior notes due 2040
“The issuance of the notes is part of the $9.1 billion of financing to be raised by NBC Universal in connection with the previously announced combination of NBC Universal with Comcast Corporation’s national cable networks, regional cable networks and certain digital media assets. Following the closing of the offering, NBC Universal will use a portion of the proceeds to repay $1.7 billion of its outstanding debt and the remaining portion will be transferred to GE as an intercompany loan. Upon the closing of the GE-Comcast transaction this loan will be repaid, and the remaining proceeds from the offering will be used to make a cash distribution to GE. If the GE-Comcast transaction has not closed before June 10, 2011 or such earlier date as the master agreement governing that transaction is terminated, then NBC Universal has agreed to redeem all of the notes at a redemption price equal to 101% of the aggregate principal amount of the notes (plus accrued and unpaid interest). These notes replace $4 billion that would otherwise have been borrowed by NBC Universal under the $6.1 billion bridge loan agreement it entered into as part of the $9.1 billion of financing for the GE-Comcast transaction,” said the GE announcement.

Prior to the offering, Moody’s Investors Service assigned a Baa2 senior unsecured rating to the senior notes.

“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,” said Moody’s.
“We believe that average leverage will remain at about 3x when we include Moody’s standard adjustments and guarantees over the intermediate term,” added. Neil Begley, a Senior Vice President at Moody’s Investors Service.

In Moody’s view the primary risk to debt investors would be a material drop in EBITDA occurring (as a result of a significant pull-back in advertising spending or a reduction in carriage fees associated with contract renewals) just following a debt recapitalization in 2014 for a partial GE buyout.

“However, we believe that the probability of a repeat of the 2009 advertising climate or something worse for NBCU right at that point in time is low, and the company would still likely generate healthy free cash flow,” stated Begley.