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Global Credit Research - 21 Mar 2011
New York, March 21, 2011 -- Moody's Investor Service said that Universal City Development Partners,
Ltd.'s (Universal Orlando) (B1 Corporate Family Rating (CFR) --
developing outlook) 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 NBCUniversal
Media LLC (NBCU; Baa2, stable rating outlook) and its affiliates
(NBCU Parties) could result in a wide range of potential ownership,
leverage and rating outcomes for Universal Orlando and NBCU over the next
12 months. Moody's believes that there could be minor rippling
repercussions for Comcast Corporation (Baa1 senior unsecured) as well.
"However, we believe that even under the most credit negative
scenarios, whereby NBCU purchase the Blackstone stake and finance
it with debt, that NBCU has the ability to absorb the impact and
within 12 to 18 months return leverage to targets that are reasonable
for current credit ratings," stated Neil Begley, a Moody's
Senior Vice President.
The NBCU Parties have 90 days from March 9, 2011 offer date (until
June 12, 2011) to accept the selling price offered by Blackstone.
Moody's 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 in a 50-50 joint venture with
a private equity firm would clarify the long-term strategic position
of the company to NBCU. 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 determining the impact on NBCU.
Moody's believes that the worst case credit scenario would be for
NBCU to acquire the stake and refinance all of the Universal Orlando debt
at the NBCU level. This would give NBCU full access to the Universal
Orlando cash flows, and would save interest cost on the existing
outstanding debt, but it would incur higher leverage and interest
costs overall at NBCU. We believe that leverage could climb but
would likely not materially impact NBCU or its credit rating, as
leverage would decline rapidly back to under 3.0x within 12 to
18 months assuming free cash flow is used to reduce debt. Moody's
notes that under this scenario, there would be a ripple effect on
Comcast as NBCU will have either higher leverage or less cash on hand
to help fund Comcast's purchase of the remaining NBCU stake held
by General Electric (GE -- Aa2) over the coming seven years.
However, Moody's believes that Comcast can easily accommodate
the additional capital requirement and maintain its metrics by funding
the additional cash cost with free cash flows, though perhaps repurchasing
slightly less of its stock or utilizing some of its financial flexibility.
If NBCU declines Blackstone's offer, then Blackstone has 270 days
to solicit bids for the entire company (including NBCU's stake,
which is potentially "dragged along" in any sale process). If Blackstone
is successful in finding a third party buyer that wishes to purchase all
of the company (and not just the Blackstone stake), 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. Such a scenario could result in NBCU receiving
a previously unanticipated cash windfall that we believe would be stockpiled
to help fund the buyout of GE and reduce the amount needed to be contributed
in the future by Comcast, and increasing financial flexibility.
"We also believe that if NBCU exits ownership of the Orlando park
may mean that the other theme park interests are also non-core
and could be sold in the future as well, however, we believe
that there is a good possibility that a third party would wish for NBCU
to remain a stake holder in Universal Orlando for strategic reasons,"
The last rating action for Comcast was on November 17, 2010 when
Moody's assigned a Baa1 rating to the company's sterling denominated senior
unsecured notes due 2029.
The last rating action for NBCU was on September 27, 2010 when Moody's
assigned a Baa2 rating to NBCU's new bond offering.
Moody's subscribers can find further details on Comcast's and NBCU's
rating rationale in the credit opinion published on www.moodys.com.
The principal methodology used for Comcast rating was Moody's Global Cable
Television Industry Methodology, published in July 2009.
The principal methodology used in rating NBCU was Moody's Global Diversified
Media Industry rating methodology, published in December 2010.
They are available on www.moodys.com in the Rating Methodologies
subdirectory under the Research & Ratings tab. Other methodologies
and factors that may have been considered in the process of rating this
issuer can also be found in the Rating Methodologies sub-directory
on Moody's website.
Comcast Corporation, with its headquarters in Philadelphia,
Pennsylvania, is a leading provider of video, high-speed
Internet and phone services to residential and commercial customers.
The company also owns a controlling interest in NBCU and, Internet
businesses, professional sports teams, and a large,
NBCUniversal Media LLC, with its headquarters in New York,
New York, is a jointly owned company by Comcast and GE that is a
diversified media content company comprised of cable and broadcast networks,
broadcast television stations, a film studio and theme parks.
Senior Vice President
Corporate Finance Group
Moody's Investors Service
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's says that the potential buyout of Blackstone's 50% stake in Universal Orlando unlikely to impact NBCUniversal's or Comcast's credit ratings
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