S&P Places AT&T Ratings On CreditWatch Negative

By Markets MarketWatch Pulse

Standard & Poor's said Monday it's placing AT&T Inc.'s BBB-plus rating on CreditWatch negative, after the company said it has agreed to buy Time Warner Inc. for $85.4 billion. The agency said it expects to deal to push AT&T's adjusted debt-to-EBITDA ration to about 3.7 times, excluding synergies, from about 3.1 times. The deal will be funded with a mix of 50% equity and 50% cash, with the cash component to be funded through a combination of cash and debt. "We believe the acquisition has some strategic merits in that it will bring together Time Warner's vast library of content assets with AT&T's distribution capabilities," S&P credit analyst Chris Mooney said in a statement. Any downgrade will depend on the company's financial policy and commitment to debt reduction, its ability to growth EBITDA and generate free cash flow. S&P is expecting any potential downgrade to be limited to one notch, which would place the rating two notches above speculative, or "junk" bond status. AT&T shares were down 1.8%.

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