Comcast launches US$4.5bn bond issue to fund DreamWorks deal

US cable giant Comcast has launched a multi-tranche US$4.5bn bond offering to fund its pending US$3.8bn acquisition of DreamWorks Animation and for working capital and general corporate purposes. Fitch has assigned an A- rating to the senior unsecured notes with a stable outlook.

US cable giant Comcast (NASDAQ:CMCSA) has launched a multi-tranche US$4.5bn bond offering to fund its pending US$3.8bn acquisition of DreamWorks Animation (NASDAQ:DWA) and for working capital and general corporate purposes.

The offering consists of US$700m of 1.625% notes due 2022, US$1.4bn of 2.35% notes due 2027, US$1bn of 3.2% notes due 2036 and US$1.4bn of 3.4% notes due 2046, according to a company SEC filing.

The joint bookrunning managers for the transaction are Citigroup , JP Morgan , Mizuho Securities , Barclays , Goldman Sachs and SMBC Nikko . The co-managers are BofA Merrill Lynch , BNP Paribas , Credit Suisse , Deutsche Bank , Morgan Stanley , RBC , TD Securities , Wells Fargo , Commerzbank , DNB Markets , PNC , US Bancorp , Lloyds , Société Generale , Allen & Company, Evercore , CastleOak , CL King & Associates , Drexel Hamilton , Lebenthal , Loop , Mischler Financial Group , Ramirez & Co and The Williams Capital Group .

The notes will be unsecured and rank equally with all of the company and its guarantors’ secured and unsubordinated debt. The guarantors are subsidiaries Comcast Cable Communications and NBCUniversal.

Earlier this week, Fitch assigned an A- rating to the senior unsecured notes with a stable outlook.

“Comcast’s capital structure and financial strategy remains balanced between investing in its businesses, reducing leverage to its target range of 2x and returning excess capital to shareholders,” the ratings agency said.

Fitch also pointed to the cableco’s strong operating profile and solid free cash flow, which give it significant financial flexibility; consistent capital allocation strategy; strong competitive position as one of the largest video, high-speed data and phone providers in the US; NBCUniversal’s position as one of the world’s most prominent media and entertainment companies; the strength of its cable networks; and the decision to buy a 51% stake in Universal Studios Japan, boosting its international parks business.

While the growing popularity of OTT services presents a threat to the company, Fitch does not expect this to materially affect Comcast’s operating or credit profile over the current ratings horizon.

“[T]he largest offset to the threat of OTT to Comcast's cable business is that regardless of how a subscriber consumes video content - through the internet or with a traditional video service - the subscriber will still need to pay for network access (video or high-speed data service),” the agency said.

Comcast agreed in late April to buy Hollywood studio DreamWorks in a deal which should cement its position as a major family entertainment studio and boost its online video and theme park businesses.

Yesterday, the company was named as a possible suitor for telco and ISP Level 3 Communications, which has reportedly commenced a strategic review that could result a sale.

Comcast had about US$56.4bn of debt and preferred stock outstanding as of 31 March 2016, including US$12.8bn at NBCUniversal Media and US$5.2bn at NBCUniversal Enterprise.

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