DIRECTV 2003 Annual Report Download - page 63

THE DIRECTV GROUP, INC.
SECURITY RATINGS
Debt ratings by the various rating agencies reflect each agency’s opinion of the ability of issuers to repay
debt obligations as they come due. Ratings in the Ba/BB range generally indicate moderate protection of interest
and principal payments, potentially outweighed by exposure to uncertainties or adverse conditions for Moody’s
Investor Services, or Moody’s, and Standard & Poor’s Ratings Services, or S&P, respectively. Ratings in the B
range generally indicate that the obligor currently has financial capacity to meet its financial commitments but
there is limited assurance over any long period of time that interest and principal payments will be made or that
other terms will be maintained. In general, lower ratings result in higher borrowing costs. A security rating is not
a recommendation to buy, sell, or hold securities and may be subject to revision or withdrawal at any time by the
assigning rating organization.
The Company
On February 28, 2003, Moody’s withdrew our Ba3 senior secured credit rating after our senior secured
credit agreement was repaid and terminated on that date. At that time, Moody’s affirmed our Ba3 senior implied
rating. The rating outlook remained stable for us.
On April 9, 2003, S&P affirmed our long-term corporate credit rating of B+. At the same time, S&P revised
our CreditWatch implications from developing to positive. The rating action stemmed from the announcement of
the News Corporation transactions.
On November 25, 2003, S&P raised our rating. Our long-term corporate credit rating was raised from B+ to
BB and remains on CreditWatch with positive implications. The increase in ratings was based on our improving
operating and financial performance, while the positive CreditWatch reflects the potential ratings upgrade
following the completion of the News Corporation transactions. The above ratings and outlook were affirmed on
December 22, 2003 when the News Corporation transactions were completed. The positive CreditWatch remains,
pending an assessment of our business plan.
DIRECTV U.S.
On April 9, 2003, Moody’s affirmed its stable outlook and Ba3 senior implied rating of DIRECTV U.S. The
ratings action followed the announcement of the News Corporation transactions. The affirmation is based upon
Moody’s expectation that the transactions would not have a material impact on the credit metrics. On February
19, 2003, Moody’s assigned to DIRECTV U.S. a Ba2 senior secured rating with respect to its senior secured
credit facilities and a B1 senior unsecured rating on the $1.4 billion senior unsecured notes. Moody’s has also
assigned a B2 issuer rating to DIRECTV U.S. Moody’s assigned a stable outlook to DIRECTV U.S.’ ratings. The
rating outlook presumed diminishing capital and investment requirements, combined with operating profit
improvement to generate eventual free cash flow, and therefore the ratings were considered to be moderately
prospective.
On February 12, 2003, S&P assigned a BB- rating on the senior secured credit facilities and a B rating on
the $1.4 billion of senior unsecured notes. The ratings were placed on CreditWatch with positive implications,
based on S&P’s assessment of the likelihood that the Company or DIRECTV U.S. could be acquired by an entity
with higher credit quality than the Company.
On November 25, 2003, S&P raised its ratings on DIRECTV U.S. The senior secured credit facilities rating
was raised to BB from BB- and the $1.4 billion senior unsecured notes to BB- from B. Both ratings remain on
Credit Watch with positive implications. The increase in ratings were based on improving operating and financial
performance. The above ratings and outlook were affirmed on December 22, 2003 when the News Corporation
transactions were completed. The positive CreditWatch remains, pending an assessment of DIRECTV U.S.’
business plan.
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