Fitch rates Liberty Interactive notes BB

Fitch Ratings said it assigned an expected BB rating with recovery rating of RR4 to Liberty Interactive LLC's proposed exchangeable senior unsecured debentures.

The proceeds will be used primarily for debt repayment and general corporate purposes, Fitch said.

Liberty's and QVC Inc.'s ratings reflect the consolidated legal entity and obligor credit profile rather than the tracking stock structure of Interactive (QVCA/B)/Ventures, the agency said.

Based on an interpretation of Liberty's indentures, Fitch explained that Liberty cannot spin out QVC without bondholder consent.

Because QVC generates 84% of Liberty’s revenues and 96% of its EBITDA, a spinoff would trigger substantially all asset-disposition restriction in the Liberty indentures, the agency said.

The ratings materially rely on QVC, Fitch said, with Liberty's other investments viewed as incremental support.

The ratings also consider the company’s July 2016 spinoff of CommerceHub, Inc. and its expected spinoff of Liberty Expedia Holdings, Inc., the agency said.

Fitch said it expects Liberty's free cash flow to be dedicated to share repurchases and debt reduction and QVC to manage to its stated 2.5x leverage target within 18 months, primarily though EBITDA growth.

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