Comcast's Big Balance-Sheet Moves


Since it bought AT&T Broadband in November, Comcast Corp. has been on a tear to refinance debt, slashing its bank commitments by almost $9 billion.

At its all-day analyst meeting May 16, Comcast executive vice president and treasurer John Alchin outlined an impressive series of deals, including refinancings and maturity extensions that place Comcast well on the road to achieving the debt level it held prior to the AT&T acquisition.

So many lines

"There were some fundamental issues that we had to deal with," Alchin said at the conference. "They have been addressed. Secondly, we had to open the door to an opportunity to try to optimize the balance sheet.

"We inherited an unbelievably complicated balance sheet [from AT&T], with a whole host of instruments and issues."

After the deal closed, Comcast had $17 billion in bank commitments, including a $7 billion bridge loan (of which $4 billion was drawn down), a 364-day backup line of credit for $1.9 billion, term loans for $3.2 billion and revolving loans totaling $4.9 billion.

"We were able, over the last four to five months, to remove $9 billion of reliance out of the bank market," Alchin said.

"At the same time, we were successful in putting in place a new bank facility that pushed the maturities out into the 2006-2007 time frame. We are left with absolutely minimal bank refinancings and, in effect, have pushed the repayment of bank debt into the 2006-2007 time frame.

"What we have done by doing this is to create for ourselves some $4 [billion] to $5 billion of availability year in, year out, through to the point where we will be significantly cash-flow positive."

Leverage ratio ralls

Comcast reduced its total debt by about $2 billion — from $29.5 billion as of Dec. 31, 2002 to $27.2 billion as of March 31. In addition, the Philadelphia-based MSO reduced its debt-to-cash-flow ratio from 5.2 times as of Dec. 31 to 4.2 as of March 31.

In a research note, Banc of America Securities LLC cable analyst Doug Shapiro praised the financing strategy, estimating Comcast's leverage ratio will drop to less than 3 by the end of the year.

Shapiro noted that the issuance of about $3 billion in new notes, the pay-down of the bridge loan and the closing of the restructuring of Time Warner Entertainment L.P. — in which Comcast received $2.1 billion in cash, $1.5 billion in AOL Time Warner Inc. stock and 21% of a future Time Warner Cable initial public offering, in exchange for its 27% stake of in the partnership — are major milestones.

Comcast also received about $525 million in cash and equity by selling some cable systems to Bresnan Communications Inc.

Shapiro estimated that given these deals, Comcast has about $3.8 billion in cash and available facilities at the end of the quarter.

By replacing the $3.2 billion bank line (which matured in 2004) with a $2.75 billion facility maturing in 2006, coupled with a $1 billion bond deal, Comcast is "well within the range of an investment-grade cable credit," Shapiro wrote.

Comcast has targeted a debt level of between $25 billion and $26 billion by the end of the year and has vowed to reduce leverage ratios to pre-acquisition levels.

According to the analyst-day presentation, Comcast has an average interest rate of 7.8% on its public notes and 2.6% on its bank debt. The mix of fixed to floating debt is 72% to 28%.