New York, September 13, 2012 -- Moody's Investors Service assigned a B1 rating to the proposed $500
million bond issuance of Cablevision Systems Corporation (Cablevision).
The company expects to use proceeds primarily to repay existing debt.
Moody's also affirmed the Ba2 corporate family and probability of
default ratings.
A summary of today's action follows.
Cablevision Systems Corporation
....Affirmed Ba2 Corporate Family Rating
....Affirmed Ba2 Probability of Default Rating
....Senior Unsecured Bonds, Assigned
B1, LGD5, 89%
....8% Senior Unsecured Bonds due April
2020, Affirmed B1, LGD adjusted to LGD5, 89%
from LGD6, 91%
....8.625% Senior Unsecured
Bonds due Sept 2017, Affirmed B1, LGD adjusted to LGD5,
89% from LGD6, 91%
....7.75% Senior Unsecured Bonds
due April 2018, Affirmed B1, LGD adjusted to LGD5, 89%
from LGD6, 91%
....Affirmed SGL-2 Speculative Grade
Liquidity Rating
Outlook, Stable
CSC Holdings, LLC
....Senior Secured Bank Credit Facility,
Affirmed Baa3, LGD adjusted to LGD2, 19% from LGD2,
18%
....6.75% bonds due Nov 2021,
Affirmed Ba3, LGD4, 63%
....8.5% bonds due April 2014,
Affirmed Ba3, LGD adjusted to LGD4, 63% from LGD4,
66%
....8.5% bonds due June 2015,
Affirmed Ba3, LGD adjusted to LGD4, 63% from LGD4,
66%
....7.875% bonds due Feb 2018,
Affirmed Ba3, LGD adjusted to LGD4, 63% from LGD4,
66%
....7.625% bonds due July 2018,
Affirmed Ba3, LGD adjusted to LGD4, 63% from LGD4,
66%
....8.625% bonds due Feb 2019,
Affirmed Ba3, LGD adjusted to LGD4, 63% from LGD4,
66%
Outlook, Stable
Newsday LLC
....Senior Secured Bank Credit Facility,
Affirmed Ba3, LGD adjusted to LGD4, 63% from LGD4,
66%
Outlook, Stable
RATINGS RATIONALE
Moody's expects the transaction to provide cost effective capital
to address upcoming debt maturities, improving the liquidity profile.
Depending on timing of debt repayment with proceeds from the issuance,
gross debt may rise temporarily, but Moody's expects the bulk
of the proceeds to eventually reduce debt.
Moody's expects Cablevision's credit metrics to continue to
deteriorate over the next year due to its strategy of increased investment
and more aggressive pricing, elevating credit risk and positioning
the company weakly within its Ba2 CFR. However, the affirmation
of the Ba2 CFR and stable outlook incorporate expectations that as the
benefits of the strategy take hold and some of the necessary spending
wanes, the credit profile will begin to improve in late 2013.
Furthermore, Moody's affirmed the SGL-2 speculative
grade liquidity rating and believes Cablevision's good liquidity
affords it the time and flexibility for this investment.
Moody's expects Cablevision to maintain its industry leading revenue
per homes passed and penetration across video, data and voice products
despite the intense competition from Verizon FiOS, which supports
asset value and the Ba2 corporate family rating. The sizeable customer
base also provides a reasonably stable stream of cash flow. However,
Moody's expects free cash flow to deteriorate over the next year
as Cablevision spends heavily to enhance its competitive position,
which elevates credit risk and positions the rating weakly. Despite
expectations for only neutral to marginally positive free cash flow in
2012, Cablevision maintains good liquidity from balance sheet cash
and its revolving credit facility, affording the company with time
for benefits of its strategy to take hold. Management's track
record of shareholder oriented activity and investments in risky,
non-core assets continues to constrain the rating, but Moody's
expects management to moderate this activity as it focuses on adding innovative
products and services and improving its competitive position in its core
cable business. Also, Cablevision's non-cable
segments, including Newsday, have been consuming less cash
in the last few quarters, and cost efficiencies and the potential
sale of Clearview Cinemas could further stem the cash burn of these operations
and improve the consolidated credit profile.
The stable outlook incorporates expectations that credit metrics will
improve in 2013 such that leverage falls below 5 times debt-to-EBITDA
and free cash flow increases from expected 2012 levels of less than $50
million. The stable outlook also assumes maintenance of good liquidity
and strong operating metrics, including a triple play equivalent
ratio of around 50% and annual revenue per homes passed of over
$1100.
Moody's would consider a negative outlook or downgrade based on
expectations for leverage to remain at or above 5 times debt-to-EBITDA
beyond 2013 or for lack of improvement in free cash flow or deterioration
of the liquidity profile. Evidence of weakening subscriber trends
or inability to improve margins from currently depressed levels of the
first half 2012 could also have negative ratings implications.
The weak credit metrics and management's track record of shareholder
oriented activity and risky investments constrain the rating. Upward
momentum is highly unlikely absent management commitment to a more conservative
profile and expectations for leverage sustained around 4 times debt-to-EBITDA
and free cash flow to debt in the high single digits. An upgrade
would also require evidence of resilience of the operations to competition.
The principal methodology used in rating Cablevision Systems Corporation
was the Global Cable Television Industry Methodology published in July
2009. 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.
Headquartered in Bethpage, New York, Cablevision Systems Corporation
serves approximately 3 million video customers, 2.8 million
high speed data customers, and 2.3 million voice customers
in and around the New York metropolitan area, as well as about 300
thousand video, 275 thousand high speed data, and 165 thousand
voice customers in Montana, Wyoming, Colorado and Utah following
its acquisition of Bresnan Broadband Holdings LLC in December 2010.
Cablevision is the direct parent of CSC Holdings, Inc, which
also owns Newsday LLC, the publisher of Newsday and other niche
publications.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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 relevant 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
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the lead rating analyst and to the Moody's legal entity that has issued
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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
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's assigns B1 to Cablevision bonds, affirms Ba2 CFR
