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Rating Action:

Moody's assigns Ba2 To CSC Holdings senior unsecured bonds, outlook remains negative

20 May 2014

New York, May 20, 2014 -- Moody's Investors Service assigned a Ba2 rating to the proposed senior unsecured bonds of CSC Holdings, LLC (CSC). Moody's also upgraded the rating on CSC's outstanding senior unsecured bonds to Ba2 from Ba3, affirmed the Ba2 corporate family for CSC's parent company Cablevision Systems Corporation (Cablevision), and maintained the negative outlook.

The company plans to use proceeds primarily to repay a portion of the existing CSC term loan.

A summary of today's action follows.

CSC Holdings, LLC

....Proposed Senior Unsecured Bonds, Assigned Ba2, LGD4, 60%

....8.625% Senior Unsecured Bonds due February 2019, Upgraded to Ba2 from Ba3, LGD adjusted to LGD4, 60% from LGD4, 61%

....6.75% Senior Unsecured Bonds due November 2021, Upgraded to Ba2 from Ba3. LGD adjusted to LGD4, 60% from LGD4, 61%

....7.625% Senior Unsecured Bonds due July 2018, Upgraded to Ba2 from Ba3. LGD adjusted to LGD4, 60% from LGD4, 61%

....7.875% Senior Unsecured Bonds due February 2018, Upgraded to Ba2 from Ba3. LGD adjusted to LGD4, 60% from LGD4, 61%

....Senior Secured Bank Credit Facility, Affirmed Baa3, LGD adjusted to LGD2, 18% from LGD2, 19%

....Outlook, Remains Negative

Cablevision Systems Corporation

....Corporate Family Rating, Affirmed Ba2

....Probability of Default Rating, Affirmed Ba2-PD

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

....Senior Unsecured Bonds, Affirmed B1

....Outlook, Remains Negative

RATINGS RATIONALE

The transaction favorably extends maturities, although it could increase annual interest expense modestly (about $10 million) given the replacement of bank debt with bonds, with no impact on leverage. Moody's upgraded CSC's senior unsecured notes to Ba2 from Ba3 based on the planned reduction of bank debt senior to these bondholders.

The outlook remains negative, despite Moody's expectations for continued improvement in financial metrics. Management reduced shareholder rewards to improve its credit profile, with the potential for continued improvement given the substantial balance sheet cash ($768 million as of March 31) and likely margin improvement from cost cutting actions. However, Moody's remains concerned about Cablevision's growth prospects given its already very high customer penetration and continued intense competition. Moody's expects capital expenditures to remain high as the company invests to maintain its competitive position, which will leave minimal free cash flow for debt reduction.

To sustain its Ba2 corporate family rating, Cablevision's credit metrics need to improve from the debt-to-EBITDA of 5.3 times and free cash flow-to-debt of about 2% reported for the twelve months through March 31. Furthermore, we expect that the EBITDA margin and growth trajectory for the core cable segment could show modest improvement from the depressed level of 2012 and 2013 but is unlikely to revert to the stronger performance of 2008 through 2011, and as such, the leverage target appropriate for a Ba2 CFR should migrate lower, specifically to around 4.75 times debt-to-EBITDA. Price increases throughout 2013 and greater pricing discipline should lift revenue again in 2014, but escalating programming expenses will likely continue to weigh on results, and Moody's expects the company to continue to invest in its network and user experience. Cablevision has demonstrated some effort to mitigate the operational challenges with fiscal policy and cost cutting, and could further improve its credit profile, though the willingness to do so remains uncertain. Cablevision reduced its share repurchase in 2012 compared to prior years, held its dividend flat for 2011, 2012, and 2013, and has reduced balance sheet debt by about $550 million since year end 2012, funded primarily by cash proceeds from a settlement of litigation with DISH Network LLC and the sale of Bresnan Broadband Holdings LLC. The approximately $768 million cash balance as of March 31 creates capacity for incremental debt reduction, though Moody's believes the company will continue to hold substantial balance sheet cash to provide flexibility.

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. Furthermore, Cablevision maintains good liquidity from balance sheet cash and its revolving credit facility, affording the company with time for benefits of its strategy to continue to take hold. Management's track record of shareholder oriented activity and investments in risky assets continues to constrain the rating, but Moody's believes the company will refrain from meaningful share repurchase or dividend increases prior to a reduction in leverage.

The negative outlook reflects the potential for a downgrade if Moody's does not see the company on a trajectory to bring leverage down to 4.75 times and to generate improved positive free cash flow. A deterioration of the liquidity profile could also warrant a downgrade.

Inability to lower leverage to around 4.75 times or to generate free improving free cash flow could result in a downgrade. A deterioration of the liquidity profile, inability to achieve EBITDA growth, or a material erosion of subscribers could also warrant a downgrade.

Moody's would consider a stable outlook based on expectations for leverage sustained around 4.75 times debt-to-EBITDA, expanding free cash flow, and maintenance of good liquidity. A stable outlook would also require expectations for continued strong operating metrics, including a triple play equivalent ratio of around 50% and annual revenue per homes passed around $1100 or better.

Upward momentum is highly unlikely absent management commitment to a more conservative profile and expectations for leverage sustained around 3.5 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.

Headquartered in Bethpage, New York, Cablevision Systems Corporation serves approximately 2.8 million video customers, 2.8 million high speed data customers, and 2.3 million voice customers in and around the New York metropolitan area. Cablevision is the direct parent of CSC Holdings, LLC (CSC), which also owns Newsday LLC, the publisher of Newsday and other niche publications. Its annual revenue is approximately $6.3 billion.

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.

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 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 assigns Ba2 To CSC Holdings senior unsecured bonds, outlook remains negative
No Related Data.
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