S&P Quasi-Endorses GE's NBC Universal Plans (GE, CMCSA)

Standard & Poor’s Ratings Services has reviewed the ramifications of reports about General Electric Co.’s (NYSE: GE) plans for NBC Universal.  The ratings agency has said that a partial sale or IPO of NBC Universal would not adversely affect the AA+/Stable/A-1+ evaluation of GE’s “excellent business risk profile.”  S&P had previously stated it would review the outlook or rating on GE if strategic shifts in all of GE’s portfolio of businesses jeopardized the S&P view.

GE owns 80% of NBC Universal and Vivendi S.A. controls the remaining 20%. Each November, Vivendi can offer GE notice of its intent to exercise its right to exit over the following year.  This new data is on reports that GE and Comcast Corp. (NASDAQ: CMCSA) have been in discussions over forming a joint venture to take over NBC Universal ownership. This is also following indications from GE that an NBC Universal IPO is possible.

S&P noted that NBC Universal represented 12.6% of industrial segment operating income in the second quarter of 2009, but further noted that “any transaction involving NBC Universal would not likely reduce GE’s liquidity position.

More importantly, S&P said that, as of the second quarter, it believes that GE remained on track to meet previously stated assumptions for the current rating and outlook.  Some of these were ending 2009 with at least $5 billion of cash at the industrial parent, and showing that industrial cash flow from operating activities that is lower than 2008, but still at least $14 billion and with discretionary cash flow after dividends of at least $2 billion.

S&P stopped short of telling GE to proceed with the deal, but this is a signal from at least one independent ratings agency that a deal here involving NBC Universal would likely not be deemed as anything like a material adverse event that would impact its ratings.  This should also increase the chances in the public’s opinion that a deal of some sort about the NBC Universal unit is more likely.

JON C. OGG
OCTOBER 5, 2009