Fitch Affirms Liberty Media At 'BBB-' Following QVC Announcement, Outlook Stable.

Business Editors

NEW YORK--(BUSINESS WIRE)--July 7, 2003

Fitch Ratings has affirmed Liberty Media Corp.'s 'BBB-' senior unsecured rating following the company's announced agreement to acquire Comcast's 57% equity interest in QVC, Inc. for approximately $7.9 billion. The Rating Outlook remains Stable. Approximately $9.9 billion of total consolidated debt, adjusted to reflect the face amount, is affected by this rating action.

The QVC acquisition, which is subject to regulatory approvals, will raise Liberty Media's equity stake in QVC to approximately 98%. As a result of the transaction, QVC will represent Liberty Media's largest consolidated subsidiary. For the year ended December 31, 2002, QVC generated EBITDA of $858 million, which represented over 65% of Liberty Media's consolidated EBITDA, pro forma for the transaction.

The rating action recognizes that the credit profile of Liberty Media will benefit from QVC's solid revenue and EBITDA growth and strong free cash flow levels. The rating affirmation further reflects the broad penetration of QVC's programming in the U.S., reaching over 85 million homes, with significant growth opportunities in the international markets as evidenced by its presence in the UK, Germany and Japan. Credit concerns related to the acquisition primarily include the significant increase in debt and the competitive retail environment in which QVC operates. The equity funding component of the QVC acquisition is capped under the agreement between Liberty Media and Comcast. The majority of the funding is expected to be through low-cost, three-year senior unsecured seller notes.

Fitch derives the credit quality of Liberty Media utilizing a hybrid approach that balances standard credit protection measures with the company's large investment portfolio. This allows for some disassociation from market variability solely driving credit quality, and incorporates the expectation that the company will seek more active control of its investments. Fitch's hybrid approach utilizes consolidated interest coverage, overall credit quality of the company's asset composition, and asset value-to-net debt coverage.

Pro forma for the acquisition, Liberty Media's EBITDA (plus dividend and interest income) to interest expense is expected to increase to the low-to-mid two times range from the current estimated low-to-mid one times range. The company's liquidity position is expected to remain strong with cash and short-term investment balance of approximately $4.9 billion and hedges with in-the-money value of about $4.7 billion. The rating also recognizes the overall credit quality of the company's asset composition, which moderately improves as a result of the transaction. Pro forma for the transaction, the company's five largest investments are expected to be QVC, Discovery Communications, Starz Encore, News Corp. and InterActiveCorp. (formerly USA Interactive), representing over 50% of the company's total asset value (including cash and hedges).

Partially offsetting these strengths, the transaction will significantly increase net debt, reducing the company's asset value to net debt coverage ratios. The company's public investments plus hedges to total debt, adjusted to reflect the face amount, is expected to reduce to the low-to-mid one times range compared with the current estimated low two times range. Fitch expects net asset value to net debt, adjusted to reflect the face amount, to decrease to approximately the low four times range versus the current estimated mid seven times range. Traditionally, Liberty Media's asset portfolio has been approximately evenly split between public and private investments.

The Stable Rating Outlook incorporates Fitch's expectation that Liberty Media's management will continue to use a balanced approach toward its owned and managed interests, and consolidated cash flow will grow at a level commensurate with any resulting debt increases such that the company maintains its strong credit profile. The current rating action does not include any material consideration associated with Liberty Media's interest in acquiring Vivendi Universal Entertainment. Should the company be successful in the pursuit of those assets, Fitch will conduct a separate review of its credit quality at that time.