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Rating Action:

Moody's Rates Charter Communications' CCO Holdings' Bonds B2; Upgrades CCO Bank Debt to Ba1

20 Sep 2010

Other Ratings Affirmed; Approx. $13.7 Billion of Rated Debt Affected

New York, September 20, 2010 -- Moody's Investors Service assigned B2 ratings to the proposed $750 million issuance of new senior unsecured notes by CCO Holdings, LLC ("CCO Holdings"), an indirect intermediate holding company of Charter Communications, Inc. ("Charter" or the company) and Ba3 (Corporate Family Rating)-rated CCH II, LLC. Moody's also raised its ratings for the senior secured first lien bank debt of subsidiary Charter Communications Operating, LLC ("CCO"), to Ba1 (LGD2-24%) from Ba2 (LGD2-28%). All other ratings were affirmed and LGD point estimates have been revised to reflect the proforma capital structure assuming successful completion of the pending transactions, as expected. The rating outlook remains stable.

The following summary lists Moody's current ratings and today's actions for Charter's rated subsidiaries:

..Issuer: CCH II, LLC (CCH II)

....Corporate Family Rating, affirmed Ba3

....Probability of Default Rating, affirmed Ba3

....Speculative Grade Liquidity Rating, SGL-1

....$1,766 Million (fully outstanding) of 13.500% Senior Unsecured Notes due 2016, affirmed B2 (LGD6-93%)

..Issuer: CCO Holdings, LLC (CCO Holdings)

....$750 Million of New Senior Unsecured Notes due 2017, assigned B2 (LGD5-83%)

....$900 Million (fully outstanding) of 7.875% Senior Unsecured Notes due 2018, affirmed B2 (to LGD5-83% from LGD5-85%)

....$700 Million (fully outstanding) of 8.125% Senior Unsecured Notes due 2020, affirmed B2 (to LGD5-83% from LGD5-85%)

....$350 Million (fully outstanding) Senior Secured 1st Lien (but CCO stock only; hence, effectively 3rd Lien) Term Loan due 2014, affirmed B1 (to LGD5-73% from LGD5-78%)

..Issuer: Charter Communications Operating, LLC (CCO)

....$1,100 Million (fully outstanding) of 8.000% Senior Secured 2nd Lien (CCO assets) Notes due 2012, affirmed B1 (to LGD4-63% from LGD4-69%)

....$546 Million (fully outstanding) of 10.875% Senior Secured 2nd Lien (CCO assets) Notes due 2014, affirmed B1 (to LGD4-63% from LGD4-69%)

....$1,300 Million (approximately $301 Million proforma drawn for all pending transactions) Senior Secured 1st Lien (CCO assets) Revolving Credit Facility due 2015 (Dec. 2013 if CCO still has more than $1 billion of debt maturing between Jan. and Apr. 2014), upgraded to Ba1 (LGD2-24%) from Ba2 (LGD2-28%)

....$199 Million (fully outstanding) Senior Secured 1st Lien (CCO assets) Non-Revolving Credit Facility due 2013, upgraded to Ba1 (LGD2-24%) from Ba2 (LGD2-28%)

....$3,001 Million (fully outstanding) Senior Secured 1st Lien (CCO assets) Term Loan C due 2016, upgraded to Ba1 (LGD2-24%) from Ba2 (LGD2-28%)

....$3,337 Million (approximately $2,587 Million proforma outstanding for all pending outstanding) Senior Secured 1st Lien (CCO assets) Term Loan B-1 due 2014, upgraded to Ba1 (LGD2-24%) from Ba2 (LGD2-28%)

....$489 Million (approximately $413 Million proforma outstanding for all pending transactions) Senior Secured 1st Lien (CCO assets) Term Loan B-2 due 2014, upgraded to Ba1 (LGD2-24%) from Ba2 (LGD2-28%)

RATINGS RATIONALE

Proceeds from the new bond offering will be used to repay an approximately equivalent amount of CCO term debt (Term Loan B-1), plus associated transaction fees. "The overall credit impact is largely neutral" according to Russell Solomon, Moody's Senior Vice President and lead analyst for the company. "However, there is modest ongoing benefit afforded by further extension of debt maturities and the re-balancing of capital that is occurring between the main operating and holding companies on a post-bankruptcy emergence basis, a trend which we expect to continue and which in turn is now of a sufficient level to warrant the upgrade of the company's senior-most debt."

The B2 ratings for the new CCO Holdings notes reflect their structural subordination to the (reduced, but still) sizeable amount of debt claims residing at CCO. The upgrade of the approximate $7.6 billion of rated proforma CCO first lien debt (approximately $6.6 billion proforma drawn amount) to Ba1 from Ba2 reflects application of Moody's Loss Given Default Methodology, specifically incorporating the anticipated like-amount pay-down of CCO's Term Loan B-1 in short order following completion and with net proceeds of the new CCO Holdings bond offering. The net effect of these changes in capital mix for the consolidated company is a smaller amount of the (upgraded) structurally and effectively senior secured debt of CCO and a larger amount of junior-ranking debt at intermediate holding company CCO Holdings, thereby affording more debt cushion for first lien secured creditors of the main operating company.

The Ba3 CFR continues to broadly reflect the company's moderately high financial risk, as evidenced by debt-to-EBITDA leverage of approximately 5.1x albeit declining, and a highly competitive operating environment. The rating is supported, however, by the company's large size, expectations of continued operational improvements and meaningful perceived underlying asset value associated with its sizeable but shrinking subscriber base of approximately 4.7 million basic video customers.

The SGL-1 rating reflects our expectation that Charter will maintain a robust liquidity profile over the next twelve months. The company's liquidity position is characterized as "very good" given its balance sheet cash (albeit now more modest $67 million at 6/30/10) and projected annual free cash flow of at least $600 million (and growing) for 2010. Charter has access to a $1.3 billion revolving credit facility with an undrawn capacity of approximately $800 million at 6/30/10. Charter's short-term liquidity profile also benefits from the absence of material debt maturities until 2012. Remaining debt maturities in 2010 and 2011 include only modest requisite annual term loan amortization payments of around $62 million, which we expect will easily be paid with cash-on-hand and/or revolver capacity. Based on our projections, we anticipate Charter will remain in compliance with financial covenants over the next twelve months with sufficient EBITDA headroom.

The last rating action was on April 14, 2010 when Moody's assigned a B2 rating to CCO Holdings' proposed senior unsecured bond offering and affirmed Charter's Ba3 CFR and Ba3 PDR, among other rating actions.

The principal methodologies used in rating CCO Holdings, LLC were Global Cable Television Industry published in July 2009 and Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA

published in June 2009. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

Charter Communications, Inc. is one of the largest domestic cable multiple system operators serving approximately 4.7 million basic subscribers (5.3 million customers) and generating annual revenues approximating $7 billion. The company maintains its headquarters in St. Louis, Missouri.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information, confidential and proprietary Moody's Analytics' information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

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

New York
Alexandra S. Parker
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

Moody's Rates Charter Communications' CCO Holdings' Bonds B2; Upgrades CCO Bank Debt to Ba1
No Related Data.
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