Buying Time Warner Inc. will secure AT&T Inc. a place among THE most heavily indebted company on earth, Ryan Knutson writes. In the deal announced Saturday, AT&T agreed to pay $85.4 billion to buy the owner of CNN, HBO and TNT networks – another defensive move that is geared towards no longer just owning cables but also some of the content passing through these cables. Including debt, the value grows to $168.7 billion. And to finance the half-cash, half-stock deal, AT&T is taking on $40 billion of bridge loans. AT&T, the largest nonfinancial corporate issuer of dollar-denominated debt, already has about $129 billion in net debt, an amount that almost doubled during the past five years.
“This would put them, I think, within striking distance of the financials with respect to unsecured bond issuance,” said Mark Stodden, a credit analyst at Moody’s Investors Service. Mr. Stodden estimates the carrier’s total debt load will grow to as much as $250billion if the deal is approved. This however remains to be seen, as members of the U.S. Congress, industry groups and Republican presidential nominee started questioning the deal soon after it was announced. AT&T hasn’t said precisely how much debt it plans to issue to fund the transaction, but estimates that by the end of the first year after the deal’s close, net debt will be around 2.5 times its adjusted earnings, up from 2.24 times at the end of the third quarter.