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Rating Action:

Moody's downgrades Cablevision's secured debt rating to Ba2, following the upsize to $2.5 b

12 Jan 2018

New York, January 12, 2018 -- Moody's Investors Service, ("Moody's") has downgraded the senior secured rating at CSC Holding LLC.'s (CSC) to Ba2 (LGD2), from Ba1 (LGD2), following the announcement to upsize the currently-marketed debt offering by an additional $1 billion, to $2.5 billion. We now expect the final debt raise to consist of an incremental $1.5 billion term loan B (due 2026) and $1 billion senior guaranteed notes (due 2028), both at CSC, a wholly-owned subsidiary of Cablevision Systems Corporation (Cablevision or the company). We expect the proceeds of the borrowings to be used to repay $1 billion in unsecured notes with near term maturities, with the remainder used to fund a $1.5 billion special dividend to Altice N.V., associated with the recently announced plan to spinoff Altice USA Inc. from Altice N.V. We will withdraw the ratings on debt repaid, at close. All other ratings for Cablevision and its subsidiaries are unchanged and the outlook remains stable.

The debt is being raised based on terms and conditions that are the same as, or materially similar to, existing agreements. Moody's previously noted that a shift to a more secured capital structure would put added pressure on the previous Ba1 (LGD2) secured instrument ratings. While the company did have some capacity to increase secured debt levels and maintain the Ba1 rating, the additional $1 billion upsize exceeds the tolerance threshold, resulting in the downgrade. Since the $1 billion upsize will be used to repay upcoming maturities, we still expected pro forma closing leverage to be approximately 6.2x, up from 5.6x for the Last Twelve Months Ended, September 30, 2017. We also note, given the shift in the capital structure pro forma for this transaction, there will be downward pressure on the unsecured notes at CSC. These securities are subject to downgrade should junior debt, specifically the unsecured notes at Cablevision, be repaid.

Downgrades:

..Issuer: CSC Holdings, LLC

....Senior Secured Bank Credit Facility, Downgraded to Ba2 (LGD2) from Ba1 (LGD2)

....GTD Senior Unsecured Bonds, Downgraded to Ba2 (LGD2) from Ba1 (LGD2)

...Issuer: Neptune Finco Corp.

....Senior Secured Bank Credit Facility, Downgraded to Ba2 (LGD2) from Ba1 (LGD2)

....GTD Senior Unsecured Bonds, Downgraded to Ba2 (LGD2) from Ba1 (LGD2)

Adjustments:

..Issuer: CSC Holdings, LLC

....Senior Unsecured Bonds, Adjusted to (LGD5) from (LGD4)

..Issuer: Neptune Finco Corp.

....Senior Unsecured Bonds, Adjusted to (LGD5) from (LGD4)

RATINGS RATIONALE

Cablevision's B1 CFR reflects its high leverage declining video business, and the business risk inherent in Altice's cost cutting strategy. Altice has quickly reduced costs and realized a large portion of its $900 million in targeted savings which has boosted EBITDA, improving cash flows and leverage leading up to the announced transaction. While the company appears to be executing its plan without significant disruption to its customer base or market position, operational and financial risks remain. Leverage is elevated again, and the pursuit of strategic initiatives to grow the business require investment and risk. At the same time, competitive challenges remain intense, especially in the video market. Nevertheless, Cablevision has a strong position in very good markets with favorable demographics within its footprint. Cablevision competes head to head with Verizon's FiOS service in about half of its urban footprint. We view FiOS as a competitive product offer and expect Verizon to gain market share if Cablevision stumbles operationally. However, Cablevision's industry leading market share reflects its strength and solid operating performance, particularly in broadband where its upgraded network produces superior network speeds that attract and retain residential and commercial customers. We expect broadband and small business segment results to remain strong and Cablevision to retain its current market share position.

The stable outlook is based upon our expectation that leverage will fall under 6x over the next 12-18 months. The outlook also reflects our view that Cablevision will continue to generate positive free cash flow and maintain good liquidity. Moody's would consider an upgrade if leverage were sustained below 5x (Moody's adjusted), free cash flow as a percentage of debt was above 5%, and market share and liquidity were maintained, or improved. Moody's would consider a downgrade if leverage is not on track to fall below 6x (Moody's adjusted) by year end 2018, liquidity were to become constrained or market share materially erodes.

The principal methodology used in these ratings was Global Pay Television - Cable and Direct-to-Home Satellite Operators published in January 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Headquartered in Long Island City, New York, Cablevision Systems Corporation served approximately 3.1 million residential and business customers, passing 5.1 million homes in and around the New York metropolitan area as of September 30, 2017. Cablevision is wholly owned by Altice USA and is also the direct parent of CSC Holdings, LLC. Revenue for LTM September 30, 2017 was approximately $6.6 billion. Altice N.V. currently holds a 67% economic interest and 98% voting interest in Altice USA.

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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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.

Jason Cuomo
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

John Diaz
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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