Fitch could upgrade Sky

Fitch Ratings said it placed Sky plc's long-term issuer default and senior unsecured ratings of BBB- on Rating Watch Positive (RWP) following the recent by 21st Century Fox, Inc. (BBB+/stable) that it intends to acquire the roughly 61% interest in Sky that it does not currently own.

Assuming the transaction goes ahead, the agency said it expects strong strategic and operational links with Sky's higher-rated parent as per Fitch parent-subsidiary (PSL) methodology. However, legal ties in terms of direct support for subsidiary debt are less certain as it is not yet clear how 21st Century Fox intends to fund its subsidiary over the medium-term.

The agency does not assume a parent guarantee or cross default into 21st Century Fox’s debt. It therefore does not expect rating support from 21st Century Fox to be strong enough to equalize the ratings. This means the upgrade, upon a successful transaction, may be limited to only one notch, Fitch explained.

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