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Rating Action:

MOODY'S CONFIRMS CHARTER'S Ba3 CFR, OUTLOOK STABLE

28 Apr 2014

New York, April 28, 2014 -- Moody's Investors Service confirmed the Ba3 Corporate Family Rating of Charter Communications, Inc. (Charter) following its announced agreement with Comcast Corporation (Comcast) whereby Charter will acquire approximately 1.4 million existing Time Warner Cable (TWC) subscribers from the combined Comcast-TWC entity following completion of Comcast's previously announced merger with TWC. Comcast and Charter will also each transfer approximately 1.6 million customers, and Charter will acquire an approximately 33% ownership stake in a new publicly-traded cable provider (SpinCo) to be spun-off from Comcast serving approximately 2.5 million customers. This concludes the review begun on January 14, 2014. The outlook is stable.

A summary of today's action follows.

Charter Communications Inc.

....Corporate Family Rating, Confirmed at Ba3

....Probability of Default Rating, Confirmed at Ba3-PD

....Outlook, Changed To Stable From Rating Under Review

CCO Holdings, LLC

....Senior Unsecured Bonds, Confirmed at B1, LGD adjusted to LGD4, 67% from LGD4, 68%

....Senior Secured Bank Credit Facility (CCO stock only), Upgraded to Ba1, LGD2, 25%, from Ba2, LGD2, 27%

....Outlook, Changed To Stable From Rating Under Review

Charter Communications Operating, LLC

....Senior Secured First Lien Bank Credit Facility, Confirmed at Baa3, LGD adjusted to LGD2, 10% LGD2, 11%

....Outlook, Changed To Stable From Rating Under Review

RATINGS RATIONALE

Moody's confirmed Charter's Ba3 CFR based on expectations that the incremental debt incurred by Charter in conjunction with the acquisition will result in leverage of approximately 5.5 times debt-to-EBITDA, even without incorporating potential synergies from the acquisition and asset swap and the potential for incremental EBITDA growth and debt reduction prior to the transaction close. These factors should lower leverage. The pro forma leverage profile is consistent with a Ba3 CFR, and Moody's believes Charter would benefit from enhanced scale and improved geographic clustering, offsetting some execution risk, assuming the transaction occurs as proposed. Furthermore, the agreed upon deal creates clarity on Charter's expansion strategy over the next few years thereby reducing event risk. Charter would also benefit from its ownership stake in SpinCo through management fees and expanded scale. Moody's assumes that the agreement will restrict Charter from purchasing any shares in SpinCo for at least two years and that any SpinCo debt will be non-recourse to Charter.

Moody's also upgraded the rating on the term loan at CCO Holdings ($350 million outstanding, matures September 2014, security package consists of stock only, not assets) to Ba1 from Ba2. Over time the company has increased senior unsecured bonds junior to this instrument, resulting in a greater cushion of junior capital to absorb loss in a restructuring scenario.

Charter's moderate leverage of approximately 4.8 times debt-to-EBITDA poses risk considering the pressure on revenue from its increasingly mature core video offering (which comprises about one-half of total revenue) and the intensely competitive environment in which it operates, incorporated in its Ba3 CFR. Furthermore, leverage could rise to close to 5.5 times assuming the company succeeds in its proposed acquisition of subscribers from Comcast. Moody's expects Charter's initiatives to enhance its product set, especially the video offering, and to implement changes to its selling strategy and organizational structure will keep operating and capital expenditures elevated, pressuring free cash flow over at least the next year, but greater penetration of all products and continued expansion of the commercial business should yield more EBITDA. Also, capital intensity will likely moderate, albeit at a level higher than peers, which could facilitate free cash flow expansion. The company's substantial scale and Moody's expectations for operational improvements and growth in high speed data and commercial phone customers, along with the meaningful perceived asset value associated with its sizeable (6 million) customer base, support the rating, as does the company's good liquidity.

Charter's stable outlook incorporates expectations for leverage below 5.5 times debt-to-EBITDA, positive free cash flow and maintenance of good liquidity.

Moody's would likely downgrade ratings if a debt funded acquisition, ongoing basic subscriber losses, declining penetration rates, and/or a reversion to more aggressive financial policies contributed to expectations for sustained leverage above 6 times debt-to-EBITDA and / or low single digit or worse free cash flow-to-debt.

Moody's would consider an upgrade with continued improvements in both financial and operating metrics and a commitment to a better credit profile. Specifically, Moody's could upgrade the CFR based on expectations for sustained leverage below 4.5 times debt-to-EBITDA and free cash flow-to-debt in excess of 5%, along with maintenance of good liquidity. A higher rating would require clarity on fiscal policy, as well as product penetration levels more in line with industry averages and growth in revenue and EBITDA per homes passed.

The principal methodology used in these ratings was the Global Pay Television - Cable and Direct-to-Home Satellite Operators published in April 2013. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

One of the largest domestic cable multiple system operators serving approximately 4.2 million residential video customers (6 million customers in total), Charter Communications, Inc. maintains its headquarters in Stamford, Connecticut. Its annual revenue (pro forma for the acquisition of Bresnan) is approximately $8.6 billion.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Karen Berckmann
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

John Diaz
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
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JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

MOODY'S CONFIRMS CHARTER'S Ba3 CFR, OUTLOOK STABLE
No Related Data.
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