announced a plan to cut its debt by $4.5 billion, with most of the reduction coming by year's end.
The announcement Thursday evening meshes with the company's comments on
its third-quarter conference call with analysts last week, when executives acknowledged a limited-time opportunity to call certain debt, and emphasized the importance of having enough cash on hand to meet certain obligations coming due in the next few years.
Liberty said the plan was part of its effort to acquire operating control of a greater number of its affiliated companies. "We are now addressing the short-term distortion of our balance sheet that resulted from these acquisitions," CEO Dob Bennett said in a statement. "This initiative, by reducing our aggregate debt level and substantially eliminating debt maturities for the remainder of the decade, will give us the flexibility to continue to invest in growth businesses and in our own equity."
On Friday, Liberty's shares rose 18 cents to $10.37.
"Today should be positive for Liberty," wrote Guzman & Co. analyst David Joyce in a note Friday morning. He called the debt reduction plans a positive, and said investors should be heartened by Thursday's decisions by credit ratings agencies Fitch and Moody's to reaffirm their investment grade appraisals of Liberty.
On the call with analysts last week, Bennett had alluded to a "dialogue" with Moody's over how to judge Liberty's creditworthiness; Moody's had placed Liberty's Baa3-rated senior unsecured debt on review for possible downgrade.
By the end of 2003, Liberty plans to cut debt by $2.5 billion, putting consolidated debt at $11.9 billion. (That number excludes what Joyce says is $3.8 billion in debt at
( UCOMA), the international cable TV system operator which Liberty hopes to fold into the company in early 2004.)
Using mostly cash on hand for this first part of the debt reduction plan, Liberty expects to redeem $1 billion of floating rate notes issued to
as part of Liberty's acquisition of the cable operator's majority stake in the QVC home shopping channel. Liberty also expects to repay $900 million of outstanding bank debt of its wholly owned subsidiaries and retire $600 million of other corporate indebtedness.
Last week, Liberty told analysts that the Comcast-held debt would be hurt were Moody's to downgrade Liberty's credit rating. But the company also confirmed that Liberty had a window, closing next month, during which it could call the debt.
The second part of the plan envisions cutting debt by $2 billion more by the end of 2005, with the necessary money coming from free cash flow from operations and other sources.
Liberty says it also plans to replace $1.2 billion of roughly $1.9 billion in debt coming due in 2006 with longer-term, asset-backed financing.