Assignment
Discuss the debt paying experience. has the company ever defloulted? what is the character of the issuing corporation?
Comcast Bond Analysis
A. GENEREL BOND AND INVESTOR INFORMATION
1.
a. Comcast is the largest cable operator in the U.S. It has a network that spans over 56 million residential homes and businesses.With a network this large Comcast is able to provide service to 22 million television, 24 million Internet access, and 12 million phone customers. Comcast also owns NBC Universal, which operates 28 national or regional cable networks, including USA, CNBC, and E!, and the NBC broadcast network. NBCU also owns a film studio, two U.S. theme parks, and a 51% stake in another park in Japan.
b. This is a 30 year bond with a maturity date of 11/15/2035 which leaves a remaining life of 19 years. The coupon rate is 6.5% and it is not callable. It currently stands at an A rating and has a current yield of 3.66.
2. I chose this bond because it seemed to not only been doing well but steadily gone from a BBB to an A rating so I thought that I could gather sufficient information on the company and bond in order to make an educated decision on the investment of this bond.
B. EVALUATION OF THE CORPORATE BOND'S UNSYSTEMATIC RISK
1. Corporation's Ability to Repay Principal
A. Long-Term Solvency for Comcast Corporation
|
Period
|
12 months Dec-31-2013
|
12 months Dec-31-2014
|
12 months Dec-31-2015
|
12 months Dec-31-2016
|
|
Total Debt/Equity
|
92.0%
|
88.8%
|
95.3%
|
98.3%
|
|
LT Debt/Equity
|
44.6%
|
42.9%
|
45.4%
|
47.0%
|
|
Total liabilities/Assets
|
67.2%
|
66.0%
|
66.9%
|
67.1%
|
B. Long-Term Solvency for Verizon Communications Inc.
|
Period
|
12 months Dec-31-2013
|
12 months Dec-31-2014
|
12 months Dec-31-2015
|
12 months Dec-31-2016
|
|
Total Debt/Equity
|
98.1%
|
829.7%
|
617.9%
|
481.9%
|
|
LT Debt/Equity
|
94.0%
|
809.7%
|
581.5%
|
449.1%
|
|
Total liabilities/Assets
|
65.2%
|
94.1%
|
92.7%
|
91.1%
|
[1]
2. Corporation's Ability to Repay Interest
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Debt & Coverage Ratios
|
Comcast
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Industry
|
|
Debt/Assets
|
0.32%
|
0.41%
|
|
Debt/Equity
|
1.05%
|
1.96%
|
|
Current Assets/Current Liability
|
0.84%
|
0.81%
|
|
EBITDA/Interest
|
9.13%
|
-----
|
|
Debt/EBITDA
|
2.20%
|
4.23%
|
|
Cashflows Ops/Total Debt
|
0.35%
|
0.17%
|
[2]
3. Credit Position Comcast
C. Evaluation of the Corporate Bond's Investment Return and Systematic Risk
1.
D. Accuracy of the Bond Rating
A BBB bond Credit ratings is an assessment of the issuer's ability to repay its debt obligations.
• Comcast is rated at an investment grade across all three agencies
o Standard and Poor rates Comcast at A-
o Moody's rates Comcast at A3
o Fitch rates Comcast at BBB+
• It currently stands at a BBB
• Its unsystematic risk has been at a steady rate compared to its competitor which at one point reached a debt/equity ratio of 829% which indicates a high rate of debt compared to its equity and in turn would not be able to repay its debt in a timely manner.
• Comcast on the other hand has steadily been at a moderate debt/equity ratio which indicates a slightly higher equity and thus able to repay its debt.
• When compared to industry ratios on repaying interest, Comcast has maintained a very close proximity which indicates moderate to high financial health in terms of repaying interest.
• Conclusion: Yes, Comcast is rated appropriately and accurate according to public information.
E. Interest Rate Forecast, Risk, Reinvestment Risk
1. Interest rates have remained steady the last few quarters due to the presidential elections and a sluggish economy, but recently there has been talk by the fed to increase rates marginally by a quarter point by the end of the fourth quarter of this year and a total of three quarters of a percent by the end of the fourth quarter of 2017. If this were to take place, the price of BBB bonds for the next 20 years will most likely decrease to make this type of bond appealing to consumers and to match increasing rates[i][ii]
[1]https://www.capitaliq.com/CIQDotNet/Financial/Ratios.aspx?CompanyId=173341
[2]http://library.morningstar.com/stock/bonds?t=CMCSA®ion=USA&culture=USA
[i]http://www.cnbc.com/2016/08/23/why-fed-wont-hike-interest-rates-until-after-the-elections.html
[ii]http://www.forbes.com/sites/billconerly/2015/12/16/interest-rate-forecast-2016-2017-fed-tightens-for-two-more-years/#6222cf171b68