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Rating Action:

MOODY'S ASSIGNS Ba3 RATING TO MEDIACOM LLC'S AMENDED TERM LOAN; AFFIRMS B1 CORPORATE FAMILY RATING FOR MEDIACOM COMMUNICATIONS AND ALL OTHER MEDIACOM RATINGS; OUTLOOK REMAINS STABLE

05 Apr 2006
MOODY'S ASSIGNS Ba3 RATING TO MEDIACOM LLC'S AMENDED TERM LOAN; AFFIRMS B1 CORPORATE FAMILY RATING FOR MEDIACOM COMMUNICATIONS AND ALL OTHER MEDIACOM RATINGS; OUTLOOK REMAINS STABLE

Approximately $3 billion of rated debt effected

New York, April 05, 2006 -- Moody's Investors Service assigned a Ba3 rating to the proposed amended term loan of Mediacom LLC (LLC) and affirmed the Ba3 rating on the amended senior secured term loans of Mediacom Broadband LLC (Broadband). LLC and Broadband are wholly owned subsidiaries of Mediacom Communications Corporation (Mediacom). The proposed transaction provides incremental financing capacity to repay Mediacom's $172.5 million of 5.25% convertible notes maturing July 2006, extends maturities of existing term loans, and slightly increases bank capacity. As such, it represents a modest improvement in Mediacom's liquidity, although Mediacom's overall cost of debt will rise slightly following the expected repayment of the 5.25% convertible notes. The proposed transaction would increase LLC's existing senior secured term loan B to $650 million from $500 million, as well as providing Broadband with capacity for an incremental $250 million term. Moody's expects Mediacom to apply proceeds from the increased term loans to repayment of existing borrowings under its revolving credit facilities and the maturing convertibles, and it should not result in a material increase in overall debt.

Moody's also affirmed Mediacom's B1 corporate family rating and all other ratings. These ratings reflect high financial risk (7.5 times debt-to-EBITDA based on full year 2005 results), as well as Mediacom's slower rollout of new products and weaker operating performance relative to peers. The high loan-to-value coverage inherent in its incumbent cable assets, strong liquidity, management's commitment to improving the credit profile, and the potential for incremental revenue and cash flow growth over the long term as penetration of advanced services increases, however, support the ratings. A summary of today's actions follows.

Mediacom LLC

- Ba3 Secured Bank Rating Assigned

- B3 Rating on Senior Notes Affirmed

Mediacom Broadband

- Ba3 Secured Bank Rating Affirmed

- B2 Rating on Senior Notes Affirmed

Mediacom Communications

- B1 Corporate Family Rating Affirmed

- Caa1 Rating on Convertible Senior Notes Affirmed

- SGL-2 Speculative Grade Liquidity Rating Affirmed (see separate write-up)

The stable outlook reflects Moody's expectation that subscriber losses and margin erosion will moderate, and that the company will refrain from any re-leveraging initiatives prior to a meaningful reduction in debt. The strength of the company's liquidity profile will continue to be an important consideration in both the company's ratings and outlook. A positive outlook or upgrade is highly unlikely over the next 12-to-18 months given the magnitude of de-leveraging required to support higher ratings. Leverage approaching 8 times debt-to-EBITDA would likely pressure the rating down. Failure to stabilize erosion of basic subscribers and customer relationships, particularly given the near completion of the majority of DBS local TV signal rollouts, could also result in a negative outlook or downgrade.

The Ba3 senior secured ratings on the bank facilities reflect the effective and structural (by virtue of upstream subsidiary guarantees) seniority of this debt to all the unsecured debt of the company, even though the bank lenders have a security interest in stock only, not the company's assets. This senior-most debt class, which comprises slightly over 50% of total debt, also benefits from a still fairly large layer of junior capital beneath, notwithstanding a potential modest decline in this cushion due to the maturity of convertible notes at the ultimate parent within the year. The B2 and B3 senior unsecured ratings for the intermediate holding company notes of Broadband and LLC, respectively, reflect their structural and effective subordination to the large subsidiary bank credit facilities and all other claims at the subsidiary level. The lower (B3) rating for the LLC notes primarily reflects its lower quality assets relative to Broadband, as well as the higher leverage at the LLC subsidiary, even though Moody's recognizes Mediacom can shift capital between the entities, with some limitations. Notwithstanding the perceived higher quality of the Broadband assets, however, the repayment of the convertible notes could pressure the B2 rating on the Broadband notes down, given the reduction in junior capital and increase in bank debt.

Mediacom Communications Corporation is a domestic multiple system cable operator serving approximately 1.4 million subscribers in a wide variety of small markets. The company maintains its headquarters in Middletown, New York. The company's corporate family rating is B1 and the rating outlook is stable.

New York
Christina Padgett
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
William L. Hess
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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