S&P warns it may cut AT&T rating after Time Warner deal

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On Monday, S&P Global joined rival Moody’s in warning that it may slice AT&T’s credit score by up to one notch because the telecom group’s deal to buy Time Warner will add to its debt.

The New York ratings agency said that it has placed AT&T’s “BBB+” rating on credit watch negative on the heels of its pact to buy media company Time Warner for $85.4bn.

S&P said that it reckons the cash-and-stock deal will increase AT&T’s adjusted debt to earnings before income taxes depreciation and amortisation ratio to 3.7-times, excluding synergies from the transaction, from 3.1-times previously.

Still, S&P struck an upbeat tone on the transaction, which would put place media properties like HBO and CNN under the same roof as DirecTV.

“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,” said S&P credit analyst Chris Mooney said.

Moody’s warned earlier on Monday that it may cut AT&T’s Baa1 rating.

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