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Related Issuers
Rating Action:

Moody's Changes WOW'S Outlook To Negative, Affirms B2 CFR

24 Nov 2014

New York, November 24, 2014 -- Moody's Investors Service changed the outlook for WideOpenWest Finance, LLC (WOW) to negative from stable. The outlook change incorporates weaker than expected performance and continued uncertainty as to the company's ability to improve its credit profile.

Moody's also affirmed WOW's B2 Corporate Family Rating (CFR) and other ratings as shown.

WideOpenWest Finance, LLC

....Outlook, Changed To Negative From Stable

....Corporate Family Rating, Affirmed B2

....Probability of Default Rating, Affirmed B2-PD

....Speculative Grade Liquidity Rating, Affirmed SGL-2

....13.375% Senior Subordinated Bonds due Oct 15, 2019, Affirmed Caa1 (LGD6)

....10.25% Senior Unsecured Bonds due Jul 15, 2019, Affirmed Caa1 (LGD5)

....Senior Secured Bank Credit Facility, Affirmed Ba3 (LGD3)

RATINGS RATIONALE

WOW's weak operating trends and sizeable debt and interest burden leave it with questionable ability to achieve an appropriate credit profile for its B2 CFR, which would include sustainable leverage in the mid 6 times debt-to-EBITDA range and positive free cash flow. Since its acquisition of Knology in mid 2012, WOW's debt rose slightly, and given the lack of both free cash flow generation and material EBITDA growth since then, leverage remains above 7 times. Moody's believes an improvement in the cost structure combined with the possible use of asset sale proceeds for debt reduction could facilitate better metrics. Nevertheless, the uncertain trajectory warrants a negative outlook.

Moody's expectations for WOW's leverage to remain high and free cash flow to remain anemic position it weakly within its B2 corporate family rating. The good liquidity profile affords the company with time to improve, but the high leverage (in the mid 7 times debt-to-EBITDA range) nevertheless creates minimal flexibility as the company navigates an intensely competitive landscape and continues to execute on its combination with Knology. The maturity of the core video product limits growth potential, but Moody's believes the high speed data product and the commercial business could facilitate EBITDA expansion, supported by a high quality network in most of the company's footprint. A reduction in both the fixed cost base and cash spent to achieve synergies creates the potential for increasing free cash flow and lower leverage after the next several years, but Moody's expects acquisitions, shareholder distributions, or some combination of these to keep leverage at 6 times debt-to-EBITDA or higher and free cash flow below 5% of debt.

The negative outlook reflects the potential for a downgrade absent a clear path toward sustainable leverage in the mid 6 times range and sustainable positive free cash flow by the end of 2015.

Inability to reduce leverage to the mid 6 times debt-to-EBITDA range or to generate sustainable positive free cash flow by the end of 2015 would likely result in a downgrade. Evidence of weakening subscriber trends or deterioration of the liquidity profile could also result in a negative rating action.

Moody's would consider a stable outlook with expectations for sustained leverage in the mid 6 times debt-to-EBITDA range and positive free cash flow. A stable outlook would also require evidence of WOW's ability to maintain or improve its competitive position. Avista's aggressive fiscal policy including capital distributions and high leverage, and the magnitude of improvement in credit metrics required to sustain a higher rating impede upward ratings momentum over the next few years. A positive action is highly unlikely without a commitment to a stronger fiscal policy and an unexpected improvement in metrics, but Moody's would consider one based on expectations for sustained leverage around 5 times debt-to-EBITDA and free cash flow to debt in the mid to high single digits, as well as evidence of ability to maintain or improve its competitive position.

The principal methodology used in this rating was 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.

With its headquarters in Englewood, Colorado, WideOpenWest Finance, LLC provides residential and commercial video, high speed data, and telephony services to Midwestern and Southeastern markets in the United States. The company reported 653,800 video, 729,700 high speed data, and 373,900 phone subscribers as of September 30, 2014 (incorporating the sale of its assets in South Dakota). WOW expanded to the Southeastern markets with its acquisition of Knology, Inc., which closed in July 2012. Avista Capital Partners owns the company, and its annual revenue is approximately $1.2 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
Vice President - Senior 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 C 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
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Changes WOW'S Outlook To Negative, Affirms B2 CFR
No Related Data.
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​
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