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Announcement:

Moody's expects WOW'S CFR to remain B2 following Knology acquisition

18 Apr 2012

New York, April 18, 2012 -- Moody's Investors Service expects the corporate family rating (CFR) of WideOpenWest Finance, LLC (WOW) to remain B2 should it execute on its proposed acquisition of Knology, Inc. (Knology, B1 CFR).

RATINGS RATIONALE

We believe the transaction will incorporate both incremental debt and an equity contribution from Avista Capital Partners, which currently owns WOW. Based on WOW's historic tolerance for raising leverage related to acquisitions and dividends as well as Knology's currently stronger credit profile, we anticipate leverage of the combined entity will be in the high 6 times debt-to-EBITDA range, in line with WOW's existing leverage. Knology's leverage for the full year ended 2011 was approximately 4.2 times debt-to-EBITDA, and WOW's was approximately 6.6 times.

We believe the transaction will involve a refinancing of the majority of the companies' existing capital structures and all rated debt. Given change of control provisions within Knology's all bank capital structure, we consider repayment of Knology's existing rated debt likely. Given the relatively near term maturities of WOW's existing rated debt (June 2013 for the first lien revolver, June 2014 for the first lien term loan, and June 2015 for the second lien term loan), we expect the company will address its debt capital structure as part of this transaction. Should the transaction proceed as expected, Moody's would likely withdraw all existing Knology ratings.

The transaction would create execution risk, and costs related to achieving synergies and integration would likely consume cash, making a good liquidity profile pro forma for the deal essential to maintaining WOW's B2 corporate family rating. However, benefits of the proposed transaction include advantages of greater scale, which would likely yield cost savings on purchases of programming and equipment. Furthermore, we believe the combination would advance WOW's still nascent commercial business (estimated at less than 5% of total revenue), given Knology's experience in this segment (commercial represents slightly over 20% of Knology's total revenue).

The principal methodology used in rating WideOpenWest Finance LLC 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 Englewood, Colorado, WideOpenWest Finance, LLC (WOW) is a competitive broadband provider offering cable TV (approximately 436,000 subscribers), high speed Internet services (413,000) and telephony (253,000) to residential and commercial customers in Illinois, Michigan, Ohio and Indiana. Its revenue for 2011 was approximately $615 million. Avista Capital Partners owns the company.

Knology, Inc. (Knology) provides video, voice, data, and communications services to residential and business customers in the southeastern and midwestern United States. As of December 31, 2011, it served approximately 257,000 video, 262,000 high speed data, and 277,000 telephone subscribers. As an "overbuilder," the company historically built or acquired networks in regions overlapping that of larger incumbent cable operators, such as Mediacom (B1) and Comcast (Baa1). Knology attempts to differentiate itself with high quality product offerings and efficient but localized customer service. Knology generated revenue of approximately $520 million for the year ended December 31, 2011.

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 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.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a 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 Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's 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 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.

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 expects WOW'S CFR to remain B2 following Knology acquisition
No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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​
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