While a prolonged, ambiguous action with the Department of Justice over its Time Warner Inc. (TWX) acquirement would counterbalance on AT&T Inc. (T) , Moody's Investors Service says says the telecom's acclaim contour would account if the accord avalanche apart.
AT&T agreed to pay $85.4 billion, or $108.7 billion including affected debt, for Time Warner in October 2016. The telecom projected aplomb that the accord would abutting this year, but Chief Banking Officer John Stephens said at a November broker appointment that the "the timing of the closing of the accord is now uncertain." The DoJ reportedly requested that AT&T bankrupt either the Turner cable networks, which accommodate CNN, TBS and TNT, or DirecTV.
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"The accord would accept resulted in a cogent access in advantage and banking accident that we acquainted was not account by other benefits," Moody's analyst Mark Stodden said. "We put the ratings on analysis for decline back they appear the deal. If they were to abolish the transaction the banking appulse is affectionate of limited."
If the accord avalanche apart, AT&T could be on the angle for a $500 actor abortion fee. AT&T has already aloft $30 billion in debt for the Time Warner purchase, however. If the transaction does not close, Stodden said, the telecom would accept to accord the debt at 101% of par--which would add a $300 actor expense. AT&T has additionally acceptable racked up a bill from attorneys and lobbyists.
The bill could be essentially college if AT&T had a abiding action with the Department of Justice that lasts a year or more. The telecom would accept to pay absorption on the $30 billion in debt. "Now we're talking absolute money," Stodden said.
Stodden advised the appulse in a contempo note. Blocking the accord would "harm, but not derail" AT&T's abiding video bundling action he noted. "If the ambiguity drags on for long, this could accept abrogating after-effects for AT&T, but the appulse will be bound if the accord is ultimately approved," the analyst added.
AT&T already offers a accord on Time Warner's HBO with its wireless plans. "Without agreeable ownership, AT&T would accept beneath advantage over agreeable costs and administering rights," Stodden added. "But, back AT&T will still allegation to access a cogent bulk of its agreeable rights from third parties, with or after owning Time Warner, its business plan will not be ultimately batty if the accord break apart."
Trump's common criticism of AT&T could accommodate the telecom with armament if it challenges the alliance analysis in court, KeyBanc Capital Markets analyst Andy Hargreaves appropriate in a note.
"Despite a renewed bender of analysis about the deal, acknowledged antecedent charcoal durably on the company's side, in our view, and political meddling appears added acceptable to abate the allowance of the DoJ filing to block the deal, as it would actual acceptable be acclimated adjoin it in the after case," Hargreaves wrote.
AT&T has told investors that regulators absolutely like vertical consolidation. Chairman and CEO Randall Stephenson said at a Vanity Fair appointment in October that by TV administering with cable channels, video assembly and wireless networks, AT&T could cut out margins that alone providers of those casework would charge.
CFO Stephens common the appearance at a November Wells Fargo Securities LLC conference. "If you attending at this vertical merger, you can see that these types of mergers accompany abundant allowances to barter and accept actual commonly been accustomed by the DOJ and the federal government," Stephens said. "In fact, a vertical alliance like this hasn't been blocked for over 40 years."
Comcast Corp. (CMCSA) won approval for its acquirement of a authoritative pale in NBC -- from a Democratic administering no beneath -- in 2011. AT&T's acquirement of Time Warner follows a agnate archetypal by accumulation a TV administering arrangement with blur and TV production.
"We apperceive of no able acknowledged antecedent for blocking this deal, and can anticipate of no complete altercation for creating a new precedent,' KeyBanc's Hargreaves wrote. "The angle of President Trump should accept no absolute ascribe on the DoJ's work."
Comcast is a captivation in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted afore Cramer buys or sells CMCSA? Learn added now.
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