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Announcement:

Moody's changes Universal Orlando's outlook to developing on Blackstone sale offer

15 Mar 2011

Approximately $1.5 billion of debt instruments affected

New York, March 15, 2011 -- Moody's Investors Service changed Universal City Development Partners, Ltd.'s (Universal Orlando) rating outlook to developing from stable following the company's disclosure in its Form 10-K that 50%-owner Blackstone Capital Partners (Blackstone) exercised its right of first refusal and offered to sell its interest in the company to NBC Universal, Inc. (NBCU; Baa2, stable rating outlook) and its affiliates (NBCU Parties). The developing rating outlook reflects Moody's view that Blackstone's action could result in a wide range of potential ownership, leverage and rating outcomes for Universal Orlando over the next 12-18 months. Universal Orlando's B1 Corporate Family Rating (CFR), Ba2 senior secured debt ratings and B3 senior unsecured and senior subordinated note ratings are not affected at this time. However, the credit facility lenders and bondholders are protected by change of control language that would limit their downside. Moody's also updated the loss given default assessments on Universal Orlando's debt instruments to reflect the $90 million term loan paydown in March 2011 pursuant to the excess cash flow sweep.

LGD Updates:

..Issuer: Universal City Development Partners, Ltd.

....Senior Secured Bank Credit Facility, Changed to LGD2 - 21% from LGD2 - 22% (no change to Ba2 rating)

....Senior Unsecured Regular Bond/Debenture, Changed to LGD5 - 79% from LGD5 - 81% (no change to B3 rating)

....Senior Subordinated Regular Bond/Debenture, Changed to LGD6 - 93% from LGD6 - 94% (no change to B3 rating)

Outlook Actions:

..Issuer: Universal City Development Partners, Ltd.

....Outlook, Changed To Developing From Stable

The NBCU Parties have 90 days from Blackstone's March 9, 2011 offer date (until June 12, 2011) to accept the acquisition offer. Moody's believes full ownership by NBCU, which owns other Universal branded theme parks globally, rather than in a 50-50 joint venture with a private equity firm would clarify the long-term strategic and financial position of the company. The amount and source of funding in any acquisition by the NBCU Parties and what transpires with Universal Orlando's debt will be the primary factors in any rating decision. Based on NBCU's stronger credit standing, Moody's believes NBCU could raise funds at a lower cost than Universal Orlando to fund a buyout or to refinance Universal Orlando's existing debt. A full guarantee of Universal Orlando's debt not redeemed in conjunction with an NBCU buyout would result in an upgrade of its debt instrument ratings to a level closer to or in line with NBCU's rating (depending on the priority of claim within NBCU) and a withdrawal of Universal Orlando's B1 CFR.

Some consideration for an upgrade of Universal Orlando's CFR would be given if a buyout of Blackstone is completed with a significant cash injection from NBCU depending on the level of implicit support from NBCU for Universal Orlando's debt, the company's long-term financing plans and Universal Orlando's leverage. However, incremental leverage along with the single-site nature of the Orlando theme park assets would more likely result in the CFR remaining unchanged or potentially being downgraded if a transaction is funded with a meaningful level of financing at Universal Orlando that is non-recourse to NBCU.

If NBCU declines Blackstone's offer, then Blackstone has 270 days to solicit bids for the entire company (including NBCU's stake, which is "dragged along" in any sale process). If Blackstone is successful in finding a third party buyer, the NBCU Parties would be obligated to accept the sale terms only if the cash purchase price was at least 90% of the amount of Blackstone's original offer to the NBCU Parties. A sale to a third party would likely result in incremental leverage for Universal Orlando that would create downward rating pressure.

A sale of Blackstone's 50% interest in Universal Orlando to NBCU would not constitute a change of control under Universal Orlando's credit agreement or bond indentures. Moody's believes NBCU may be motivated to retire the debt as its cost of capital is lower, as noted above. Universal Orlando's notes are redeemable beginning in November 2012 at specified call prices and earlier at make-whole premiums of at least 1%. A sale of all of Universal Orlando to a third party would trigger a change of control under the credit agreement and bond indentures. Moody's would withdraw the existing debt instrument ratings if they are repaid in such a scenario, but would likely retain a CFR on Universal Orlando if new debt is rated in conjunction with the buyout.

If Blackstone and/or the NBCU Parties agree to sell any portion of their ownership interest, Steven Spielberg may have the right under his consulting agreement with Universal Orlando to sell an equivalent percentage of his compensation rights to the prospective purchasers. At present, Mr. Spielberg has a right beginning in June 2017 to terminate the consulting agreement and receive a one-time payment equal to the fair market value (as defined) of his interest in the parks and all other comparable projects. Moody's already includes in debt an estimate of the amount of the consultant put obligation and adds the consultant fee back to EBITDA when calculating leverage. The purchase price of the put and the source of financing thereof relative to the amounts currently factored into the rating will dictate whether there is an effect on the rating, if any.

Moody's will continue to monitor developments related to the sale process and will comment further as warranted. Key developments would include NBCU's decision regarding Blackstone's offer, the timing, terms and conditions of any marketing of the entire company if NBCU does not accept the offer, the source of financing for any full or partial sale, and the resulting effects on Universal Orlando's ownership structure, leverage profile and existing debt instruments.

The opening of the Wizarding World of Harry Potter (WWHP) in June 2010 drove a significant increase in attendance, revenue and EBITDA for Universal Orlando during 2010. Universal Orlando's $390 million of reported EBITDA in 2010 was approximately $90 million higher than the previous earnings peak reported in 2007. Debt-to-EBITDA leverage (4.2x FY 2010 incorporating the $90 million excess cash flow sweep paid in March 2011, Moody's standard adjustments, and the Spielberg put as debt) will likely decline in the first half of 2011 given the continued expected attendance gains driven by the WWHP attraction. Moody's believes a decision by NBCU or a third party to acquire a full or partial stake in Universal Orlando will be complicated by what are likely to be competing viewpoints regarding the sustainability of attendance and earnings driven by WWHP and other attractions.

The last rating action on Universal Orlando occurred on November 23, 2009 when Moody's upgraded the company's CFR to B1 from B2, assigned a definitive Ba2 rating to the company's senior secured credit facility, and B3 ratings to the company's senior unsecured and senior subordinated notes. The rating actions concluded the review for upgrade initiated on October 23, 2009."

Moody's subscribers can find further details on Universal Orlando's rating rationale in the credit opinion published on www.moodys.com.

Universal Orlando's ratings were assigned by evaluating factors we believe are relevant to the credit profile of the issuer, such as i) the business risk and competitive position of the company versus others within its industry, ii) the capital structure and financial risk of the company, iii) the projected performance of the company over the near to intermediate term, and iv) management's track record and tolerance for risk. These attributes were compared against other issuers both within and outside of Universal Orlando's core industry and Universal Orlando's ratings are believed to be comparable to those of other issuers of similar credit risk.

UCDP, headquartered in Orlando Florida, operates the Universal Studios Florida and Universal Islands of Adventure theme parks, and Universal CityWalk Orlando, a dining, retail and entertainment complex. Universal Orlando is a 50-50 joint venture of Blackstone and a wholly-owned subsidiary of Vivendi Universal Entertainment LLLP (VUE; an affiliate of Universal Studios, which is a subsidiary of NBCU). Revenue for the fiscal year ended December 2010 was $1.1 billion.

New York
John E. Puchalla
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
John Diaz
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's changes Universal Orlando's outlook to developing on Blackstone sale offer
No Related Data.
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