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Rating Action:

Moody's comments on impact of Rainbow National Services add-on

04 Jun 2008
Moody's comments on impact of Rainbow National Services add-on

Bank debt ratings lowered to Ba2; Other ratings affirmed

New York, June 04, 2008 -- Moody's Investors Service affirmed all existing ratings for Rainbow National Services LLC (Rainbow), a wholly-owned indirect subsidiary of Cablevision Systems Corporation (Cablevision), other than Rainbow's senior secured bank debt ratings, which were lowered to Ba2 from Ba1 following placement of an incremental $280 million add-on to its revolving credit facility which was completed yesterday. The rating outlook is stable.

The lower bank debt ratings reflect a continuation of the trend towards more bank debt financing in Rainbow's capital structure, and hence less junior capital to support multiple up-notching of this debt class, notwithstanding its senior-most ranking and the benefits afforded by its security interest in the assets of the company. This trend began with a partial redemption of senior subordinated notes last year and continues with the just completed financing which brings the secured bank debt up to nearly 60% of the company's debt capitalization. Notably, this has the effect of raising Moody's loss given default (LGD) estimates and, consequently, the expected loss for senior secured creditors, even though the perceived risk of default and overall expected loss for the company remains substantially unchanged, as reflected in the Ba3 probability of default and corporate family ratings, both of which were affirmed.

The company's very good SGL-1 liquidity profile improves only modestly proforma for the transaction, with net proceeds expected to be used to finance the cash component of the recently announced acquisition of Sundance Channel LLC by Rainbow's parent company, Rainbow Media Holdings LLC (RMH), the assets of which will notably remain outside of the Rainbow restricted group of assets.

The following reflects Moody's rating actions and current ratings for Rainbow National Services LLC:

Corporate Family Rating -- Affirmed at Ba3

Probability of Default Rating -- Affirmed at Ba3

Speculative Grade Liquidity Rating -- SGL1

Senior Secured Bank Credit Facilities -- Downgraded to Ba2 (LGD2, 28%) from Ba1 (LGD2, 23%)

Senior Unsecured Notes -- Affirmed at B1 (LGD5, 74%; previously LGD4, 68%)

Senior Subordinated Notes -- Affirmed at B2 (LGD6, 91%; previously LGD5, 89%)

Rating Outlook -- Stable

Rainbow's ratings continue to broadly reflect the risks associated with the company's moderately high financial leverage, shareholder-oriented fiscal strategies, and concentrated asset and customer bases, the cash flows from which remain exposed to greater media fragmentation in future periods. These risks remain balanced, however, by the high perceived underlying value of the company's primary assets and the free cash flow they generate (albeit which is used to fund other investments), along with a strong liquidity profile.

For additional information, please refer to the Rainbow National Services credit opinion as posted to Moodys.com within one day of this press release. A separate credit opinion for Rainbow's ultimate parent company -- Cablevision Systems, the ratings for which were affirmed on May 28, 2008 in conjunction with the $500 million bond financing by its main debt-issuing subsidiary CSC Holdings, Inc. -- is also available on Moodys.com.

Headquartered in Jericho, New York, Rainbow National Services LLC supplies television programming to cable and direct broadcast satellite service providers throughout the United States. The company predominantly operates three entertainment programming networks -- AMC, WE tv and IFC (again, Sundance Channel will be held outside of Rainbow, under RMH).

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
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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