Five-year credit protection on U.S.-based cable and media firms rallied last week with default swaps on names such as Comcast Corp. and Cox Communications thinning. Five-year default swaps on Comcast saw the largest move, sidling to 265 basis points last Wednesday, having stood as wide as 325bps the week before, according to a New York-based trader.
Comcast recently filed a shelf for USD10 billion with the Securities and Exchange Commission, which will enable the communications giant to issue several different securities, the trader said. This, as well as positive results recently announced by Cox, has encouraged market optimism on the sector. While earnings announcements have so far come out above expectations so do not justify the spread movements, said a trader. A pull back is now likely to occur, with Comcast likely to sit 20-30bps wider by mid-January, he added.
Brendan Buckley, senior director at Fitch Ratings in New York, which ranks Comcast at BBB with a stable outlook, sees potential for Comcast to improve its debt liabilities over the course of next year. He anticipates a reduction in debt of USD5 billion on the firm's approximate USD30 billion debt portfolio. The restructuring of Time Warner Entertainment, in which Comcast held a stake, has given the firm USD2.1 billion in cash with an additional USD1.5 billion in equity, which can be used to repay the firm's debt. In addition, Comcast has retained a 21% stake in Time Warner Cable, and the monetization of this, most likely to be made through an initial public offering, could also be used for debt reduction, he noted.
Five-Year Credit Protection On Cox Communications
