A Comcast-Fox marriage could be built on a ton of debt

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If both deals are successful, Comcast’s total debt will more than double to a whopping $164 billion, according to Moody’s Investors Service.

that will could give Comcast the heaviest debt burden of any company rated by Moody’s, narrowly ahead of AT&T. (AT&T could reclaim the top spot if its acquisition of Time Warner, the parent company of sy88pgw, goes through.)

Taking on so much debt could be a dramatic reversal by Comcast, a company long known for a more conservative approach to deal-doing that will relied on cash in addition to also stock.

The aggressive stance shows how badly CEO Brian Roberts wants to add Sky’s international pay-TV services in addition to also Fox’s valuable film studio in addition to also cable networks.

To use one measure of corporate leverage, Comcast’s debt today will be about 2.5 times its annual earnings. If the idea acquires both Fox in addition to also Sky, that will ratio will jump to 4.1. Among high-debt companies, only beer king Anheuser-Busch InBev (BUD) features a higher leverage ratio, Moody’s said.

the idea could be a tricky time for Comcast to pile on that will much debt. Borrowing costs have soared as the Federal Reserve raises interest rates via historically low levels. that will means the idea will cost Comcast more to borrow than the idea could have a few years ago. in addition to also the cost to refinance debt down the road may be even higher.

In addition, some economists believe the risk of a recession will rise significantly in 2019 in addition to also 2020. A downturn could hurt corporate profits, doing the idea harder for companies such as Comcast to pay back debt.

“These levels of debt have been untested in stressful financial periods, in addition to also therefore add material financial risk,” Moody’s analyst Neil Begley said in a report published on Tuesday.

Related: What Comcast, Disney in addition to also Fox all see in Sky

Moody’s warned that will Comcast has “no room for an offer for Fox without imperiling” its high credit rating.

A credit rating downgrade could increase Comcast’s future borrowing costs, doing the idea more difficult to pull off blockbuster deals like the Fox bid that will Roberts will be mulling.

Some stock analysts have voiced concern about the amount of debt Comcast needs to take on just to acquire Sky.

Cowen analyst Gregory Williams wrote to clients last month that will he will be “skeptical of the Sky deal” because of the high cost in addition to also debt burden.

Williams warned that will instead of returning cash to shareholders, Comcast will need to focus on doing the deal work in addition to also “balance sheet repair.”

Comcast declined to comment.

Of course, there will be no guarantee that will Comcast will go ahead with an all-debt Fox deal.

Last week, sources told sy88pgw that will Comcast will be in discussions with banks about doing a $60 billion play for the same assets Fox agreed to sell to Disney.

The deal could give Comcast control of Fox’s vaunted film studio, which includes franchises like X-Men in addition to also Avatar, as well as Fox’s regional sports networks. Also up for grabs: Fox’s stake in Hulu, which has 20 million subscribers.

However, a source told sy88pgw that will Comcast will probably move ahead using a deal only if AT&T (T)wins its court battle against the Justice Department to acquire Time Warner (TWX).

Comcast’s potential bid for Disney could be worth about $8 billion more than Disney has agreed to pay. Comcast could sweeten the deal even further by paying all cash.

however Comcast, like most companies not named Apple (AAPL), doesn’t have that will kind of cash sitting around. Comcast listed about $6 billion in cash on its balance sheet at the end of the first quarter.

Related: Morgan Stanley thinks the idea knows when the bull market will end

In theory, Comcast could try to acquire Fox by using stock. that will’s what Comcast tried to do in 2014 when the idea made a $45 billion all-stock bid for Time Warner Cable. Regulators opposed the deal, in addition to also Comcast eventually walked away.

However, Comcast indicated last month its stock cost will be too depressed to use the idea for acquisitions. Comcast shares are down 16% over the past year. that will leaves the company little choice however to borrow to pay for acquisitions.

Even assuming $3 billion in cost savings in addition to also various other financial benefits, Moody’s estimated the idea could take Comcast more than four years to get its leverage ratios back to healthy levels. in addition to also that will’s only if Comcast didn’t devote some of its cash toward stock buybacks in addition to also various other costly investments.

Moody’s warned that will “such a departure” via Comcast’s past practices in addition to also commitments could create “significant doubt for the future.”

— sy88pgw’s Dylan Byers, Jill Disis in addition to also Hadas Gold contributed to that will report.

sy88pgw (fresh York) First published May 16, 2018: 4:33 PM ET

A Comcast-Fox marriage could be built on a ton of debt

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