Yellow flag, red flag

18 June 2018 By Jennifer Saba Follow @jennifersaba

Big acquisitions will leave the telco and cable firm with more than $170 billion of debt each. At first, Comcast’s bid for bits of Fox would create the heavier relative leverage load. But it’s AT&T’s recently closed merger with Time Warner that looks more vulnerable.

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AT&T said on June 14 it had completed its $85 billion acquisition of media group Time Warner.

At the close of the deal, AT&T will have $180 billion in net debt or 2.9 times adjusted EBITDA, the company said. AT&T estimates the ratio will decline to 2.5 times at the end of year one from the close and return to historic levels by the end of year four. Prior to the deal, AT&T’s net debt was equivalent to 2.3 times 2018 EBITDA, according to Eikon.

Moody’s Investors Service and S&P Global Ratings downgraded AT&T’s senior unsecured ratings on June 15.

Comcast on June 13 offered to buy Twenty-First Century Fox’s entertainment and international assets for $65 billion. The cable company’s net debt could rise to $170 billion as a result. It said it plans to reduce its net-debt-to-EBITDA ratio by 0.5 turns each year.

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Yellow flag, red flag

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