Fitch Affr `A-' Rtg of Cox Enterprises; Remains on Watch Neg
21 September 2000
Fitch Affr `A-' Rtg of Cox Enterprises; Remains on Watch Neg
CHICAGO--September 21, 2000--Fitch has affirmed the `A-' senior debt rating of Cox Enterprises, Inc., while maintaining the company on Rating Watch Negative.The action reflects the near-term increase in leverage associated with the $1 billion acquisition of ADT Automotive by the company's Manheim Auctions division. The acquisition will further strengthen Manheim's leading position in the North American automobile auction business and is expected to yield significant immediate synergies. Net of auction sites that are planned to be sold, financing the acquisition will require approximately $750 million. The acquisition will increase overall debt levels and move the company outside its target of maintaining the ratio of total debt to EBITDA for Cox Enterprises (excluding its majority owned subsidiaries, Cox Communications and Cox Radio) below 2.5 times. At the end of the second quarter, Cox had approximately $2.3 billion in debt. The company recently refinanced a portion of its existing indebtedness through the issuance of $500 million of 7.875% notes due September 15, 2010 to qualified institutional buyers under Rule 144a of the Securities Act of 1933.
Underlying operating trends for Cox Enterprises' major business units are positive and the company has significant investments in marketable equity securities that may be monetized in the near term. This provides the company with the flexibility to restore the balance sheet to its more traditional capitalization. The resolution of the Rating Watch will be determined by the degree to which the company reduces debt through asset sales and through the use of free cash flow versus any commitments for additional acquisitions or investments.
Cox Enterprises' present `A-' rating recognizes the company's good business diversity, substantial investment values and its historically conservative capitalization. Primary support for the rating comes from Cox Enterprises' wholly owned businesses in newspaper publishing, television broadcasting and automobile auctions. The rating is buttressed by the company's substantial investment portfolio. These interests include a 68% ownership interest in Cox Communications, Inc., the fifth-largest cable television company, and a 64% interest in Cox Radio, Inc, a major radio station group. These majority interests are separately incorporated and financed. (Cox Communications, Inc. is rated `BBB+' by Fitch.) In addition, the company has other investment assets with an estimated market value in excess of $1 billion.
Fitch is an international rating agency that provides global capital market investors with the highest quality ratings and research. Dual headquartered in New York and London with a major office in Chicago, Fitch rates entities in 75 countries and has some 1,100 employees in more than 40 local offices worldwide. The agency, which is a combination of Fitch IBCA and Duff & Phelps Credit Rating Co., provides ratings for Financial Institutions, Corporations, Structured Finance, Insurance, Sovereigns and Public Finance Markets worldwide.