Moody's puts Liberty Media on review for downgrade

Moody's Investors Service' placed Liberty Media Corp.'s Baa3 senior unsecured ratings on review for possible downgrade in response to its acquisition of the 57.5% stake in QVC Inc. from Comcast Corp. to $7.9 billion.

Specifically, Moody's said the review reflects the potential a material increase in debt as a result of the QVC purchase, the possibility of an investment in Vivendi Universal Entertainment that may increase debt levels further and that an acquisitive bend may limit the prospect of debt reduction.

Moody's estimates that Liberty will incur in excess of $5 billion of debt to make the acquisition, which is a relatively high 6x multiple of QVC's EBITDA. Furthermore, the investment activity may strain certain asset coverage and liquidity metrics that have been the underpinning the investment grade rating.

Fitch confirms Liberty Media

Fitch Ratings confirmed Liberty Media Corp.'s BBB- senior unsecured rating following the agreement to acquire Comcast Corp.'s 57% equity interest in QVC Inc. for $7.9 billion. The outlook remains stable.

The acquisition, subject to regulatory approvals, will raise Liberty Media's equity stake in QVC to about 98%.

For the year ended Dec. 31, QVC generated EBITDA of $858 million, which represented over 65% of Liberty Media's consolidated EBITDA, pro forma for the transaction.

The rating recognizes that the credit profile of Liberty Media will benefit from QVC's solid revenue and EBITDA growth and strong free cash flow levels.

Credit concerns related to the acquisition primarily include the significant increase in debt and the competitive retail environment in which QVC operates, Fitch said.

Pro forma for the acquisition, Liberty Media's EBITDA to interest expense is expected to increase to the low-to-mid 2x range from the current estimated low-to-mid 1x range. Liquidity is expected to remain strong with a cash and short-term investment balance of around $4.9 billion and hedges with in-the-money value of about $4.7 billion.

Partially offsetting the strengths, the transaction will significantly increase net debt, reducing asset value to net debt coverage. Public investments plus hedges to total debt, adjusted to reflect the acquisition, is expected to drop to the low-to-mid 1x range compared with the current estimated low 2x range.

Fitch expects net asset value to net debt, adjusted to reflect the acquisition, to decrease to about the low 4x range versus the current estimated mid 7x range. Traditionally, Liberty Media's asset portfolio has been approximately evenly split between public and private investments.

Moody's ups Comcast outlook to positive

Moody's Investors Service confirmed the ratings of Comcast Corp. (senior unsecured at Baa3) and subsidiaries and changed the outlook to positive from stable, prompted by the sale of its 57.5% interest in QVC Inc. for $7.9 billion to Liberty Media Corp.

The outlook change is based on a view that Comcast will receive sizable proceeds from the sale which ultimately will be used to reduce debt and leverage levels, thereby accelerating improvement in credit metrics.

In addition, Moody's believes that additional asset sales proceeds may be realized over the medium term as the company participates in the IPO of its 21% residual interest in Time Warner Cable.

Moody's anticipated that Comcast would bring down what was initially considered high leverage for a Baa3 rating. The QVC sale reduces debt far more quickly than anticipated, but since QVC generated good operating and free cashflows, the reduction in leverage ratios are favorable but not as dramatic.

It also was anticipated that Comcast would pour significant capex into the AT&T cable systems to bring them up to an equivalent of previously owned systems. The amount of spending is now estimated to be somewhat less than anticipated for 2003 and 2004, Moody's said.

The resulting impact, together with the good operating performance, will likely be a quicker return to free cashflow generation than anticipated, despite the elimination of QVC.

Moody's expects this acceleration together with lower debt levels could position the company for stronger credit metrics over the next 12 to 18 months.

Fitch confirms Comcast

Fitch Ratings confirmed the BBB rating on the senior unsecured debt of Comcast Corp., along with the BBB- subordinated debt, on the sale of its 57.5% interest in QVC Inc. to Liberty Media for $7.9 billion. The outlook is stable.

The transaction is expected to result in after tax cash proceeds to Comcast of about $5.25 billion to $5.5 billion, which clearly will strengthen is credit profile.

The anticipated debt reduction from the sale more than offsets the loss of EBITDA. Year-end 2003 pro forma debt to EBITDA should be in the range of 3.5x, which is well below Fitch's initial target of below 4x.

In addition, Fitch believes Comcast has made solid progress in the execution of its deleveraging plans. At June 30, the company has received over $5 billion of proceeds from various transactions to be used for debt reduction.

Fitch expected Comcast to reduce debt to about $25-$26 billion, resulting in leverage at yearend 2003 below 4x and interest coverage in excess of 3.0x. Adding the proceeds from the QVC sale will strengthen credit metrics and clearly reflect a solid BBB company.

In the second quarter, Comcast raised $2.75 billion in senior unsecured facilities with the proceeds used to partially repay the existing two year $3.2 billion term loan. In connection with that, the company retired its $1.9 billion 364 day facility, which expired May 2003.

It should be noted that Comcast has significantly reduced bank facilities to around $8 billion from $17 billion a year ago, Fitch said. Overall, liquidity remains strong and is supported by close to $5 billion of availability on bank lines plus over $300 million in cash.

S&P ups Massey Energy outlook

Standard & Poor's revised the outlook on Massey Energy Co. to stable from negative and assigned a BB+ rating to its $355 million secured credit facility while affirming its other ratings.

The revision reflects the enhancement to liquidity with the establishment of a new bank credit facility, which has alleviated near-term maturity concerns.

Ratings reflect its substantial coal deposits and contracted production, which are tempered by high costs that have increased volatility in financial performance, S&P said.

Ratings are constrained by fluctuations in productivity measures caused, high mining costs, environmental regulations, high bonding costs and a weak economy.

Liquidity is adequate with the new bank facility, the proceeds of which were used to repay outstanding amounts under previous revolvers and the accounts receivable securitization program. On July 2, Massey had no borrowings under the new revolver or the accounts receivable securitization program.

With the enhancement of liquidity and some potential for improving industry conditions, Massey should continue to take actions to improve its high cost position and maintain credit measures in the intermediate term.

Moody's ups Getty Images outlook

Moody's Investors Service assigned a B2 rating to Getty Images Inc.'s new $265 million convertible subordinated debentures and changed the ratings outlook to positive.

The ratings and outlook consider strong operating performance, significant liquidity and strong free cash flow.

Pro forma for the new convert, total debt to EBITDA for 2003 is 1.7x. Pro forma EBITDA coverage of interest is 11.6x and EBITDA less capital expenditures coverage of interest is 9.0x. Debt to free cash flow is impressive at only 2.8x.

In spite of the weak indenture protections and the lack of upstream guarantees, the new convertible is double notched below the senior implied rating rather than triple, due to the absence of structurally or contractually senior debt other than the bank revolver.

However, should management's strategies change to increase senior debt, Moody's said it would likely reassess the notching.

The ratings are limited by the downturn in the advertising and media sectors, a recent shift in the company's product mix to lower margin products and the competitive nature of the industry. Getty Images' revenues have been pressured by advertising cutbacks that began in 2000, Moody's said.

The ratings gain support from the company's significant liquidity, improved free cash flow and significant customer diversification. Free cash flow for 2002 was about $65 million and is expected to increase through 2003. Liquidity is supported by a $85 million revolver with $81 million available.

The outlook reflects Moody's expectation for continued cash flow improvement and organic revenue growth.

S&P cuts SCOR

Standard & Poor's downgraded SCOR including cutting its €233.45 million callable convertible bonds due 2005 to BBB+ from A- and revised the CreditWatch to developing from negative.

S&P said the downgrade reflects SCOR's disappointing absolute and relative first-quarter 2003 results, indications of a weakened although still strong business position and the potential S&P sees for reported capital to be materially affected by further reserve strengthening. The potential strengthening relates particularly to SCOR's credit derivatives portfolio and its CRP subgroup (comprising Commercial Risk Reinsurance Co. Ltd. and Commercial Risk Re-Insurance Co.).

The CreditWatch revision reflects the possibility of a material improvement in SCOR's balance sheet before year-end 2003.

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