Comcast would rack up ‘unprecedented’ $170B in debt with mergers, analysts say

Comcast Center headquarters in Philadelphia. Image: Comcast
Comcast has only around $6 billion on its balance sheet, so it will have to borrow most of the $65 billion needed to purchase Fox. Additionally, it would take on around $20 million in debt from Fox should that acquisition go through. (Comcast)

Comcast will become one of the most indebted companies in the world, leveraging around $170 billion, if proposed purchases of Sky and 21st Century Fox come to fruition, according to ratings firm Moody’s.

In fact, not counting banks, Comcast would only be surpassed in debt obligation by AT&T, which just paid $85.4 billion for Time Warner Inc. after buying DirecTV for nearly $50 billion. AT&T is carrying close to $250 billion in debt obligations.

"It's an unprecedented amount of debt for a company like Comcast," Cowen analyst Gregory Williams told CNN.

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As CNN also noted, Comcast has only around $6 billion on its balance sheet, so it will have to borrow most of the $65 billion needed to purchase Fox. Additionally, it would take on around $20 million in debt from Fox should that acquisition go through.

RELATED: Comcast makes formal $65B bid for Fox, confidently includes massive breakup fee

With the two mergers, Comcast’s debt to income ratio would rise from 2.5 times its annual profit to 4.25 times.

"The willingness to take your leverage up to this level is a bit of a surprise," Morgan Stanley analyst Ben Swinburne said during a Comcast conference call last week.

Speaking to investors last week to formally announce its attempt to buy out the bulk of Fox assets from under the nose of prospective suitor Disney, Comcast CEO Brian Roberts said paying down debt will become the cable conglomerate’s top priority following the mergers.

“We're having an excellent quarter, and we've had an excellent run for several years," Roberts said. "We're confident enough in the company and our prospects that we can take a temporary releveraging and bring us back down.”

For both Comcast and AT&T, the increased scale might very well lead to the kind of profits that pay down the debt quickly—if everything goes to plan.

"If there's a recession," Cowen’s Williams said, "investors will flock away from levered companies.”

The Fox board is set to meet Wednesday to discuss accepting Comcast’s offer over a bid from the Walt Disney Company that they signed off on in December.

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