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Moody's places BSkyB's Baa1 ratings on review for downgrade

Staff writer ▼ | July 28, 2014
Moody's Investors Service has today placed the Baa1 senior unsecured ratings of British Sky Broadcasting Group plc and its rated subsidiaries under review for downgrade.
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This action follows the announcement that BSkyB has entered into agreements with 21st Century Fox America, Inc (Fox; Baa1 stable) to acquire Fox's 100% stake in Sky Italia S.r.l. and its 57.4% interest in Sky Deutschland AG (SkyD). BSkyB has also made an offer to the minority shareholders of SkyD at EUR6.75 per share.

"We currently anticipate that conclusion of the ratings review will result in a downgrade of BSkyB's senior unsecured ratings by up to two notches to Baa3, given the likelihood of increased indebtedness and weaker credit metrics when the transaction to acquire Sky Italia and SkyD closes," says Gunjan Dixit, a Moody's vice president and senior analyst, and lead analyst for the issuer.

"Even if SkyD's minority shareholders fully tender their shares, we expect BSkyB's ratings to remain in the investment grade range, although the higher debt levels would likely leave BSkyB's Baa3 ratings as weakly positioned. The final outcome of the review is subject to the actual terms under which the acquisitions will be executed." adds Ms. Dixit.

The total consideration for the Sky Italia's acquisition is GBP2.07 billion in cash and BSkyB's 21% stake in National Geographic Channel International (valued at USD650 million/ GBP382 million). The acquisition of Fox's 57.4% shareholding in SkyD is for a consideration of GBP2.9 billion in cash, valuing SkyD at EUR6.75 per share. Subject to the number of SkyD's minority shareholders that accept the offer, the total consideration for the transactions will range from GBP4.9 billion to GBP7 billion.

BSkyB will be funding the transaction through a combination of new equity, debt facilities, cash resources and the transfer of BSkyB's 21% stake in National Geographic Channel International to Fox.

Moody's aims to conclude its review when sufficient certainty is reached as to the final closing, which is expected following regulatory and independent shareholder approval.