Welcome!

News Feed Item

Fitch Affirms Cablevision's IDR at 'BB-'; Outlook Revised to Stable

Fitch Ratings has affirmed the 'BB-' Issuer Default Rating (IDR) assigned to Cablevision Systems Corporation (CVC) and its wholly owned subsidiary CSC Holdings, LLC (CSCH). In addition, Fitch has affirmed specific issue ratings assigned to CSCH and upgraded CVC's senior unsecured notes to 'B+' as outlined below.

The Rating Outlook for CVC and CSCH's ratings has been revised to Stable from Negative.

As of June 30, 2014, CVC had approximately $9.9 billion of debt outstanding on a consolidated basis.

KEY RATING DRIVERS

--The company's operating strategies and investments, coupled with pricing actions, have translated into an improving operating profile as evidenced by expanding cable segment EBITDA margins and ARPU growth;

--The Stable Outlook incorporates Fitch's expectation that CVC's credit profile will continue to strengthen in step with its improving operating profile and its ability to generate meaningful levels of free cash flow (FCF);

--Fitch expects ongoing initiatives and investments to improve operational efficiency and customer experience, together with pricing actions, will modestly improve core cable segment EBITDA margins during the rating horizon, which taken together with opportunistic debt reduction supports the current ratings;

--Fitch expects CVC will maintain a conservative approach to capital allocation as the company's operating profile continues to strengthen.

The Stable Outlook incorporates Fitch's belief that CVC's credit profile, while weakly positioned within the current rating, will continue to strengthen in step with anticipated improvement of its operating profile. This is the result of its attempts to offset rising programming and employee compensation costs with price increases and operational efficiency initiatives aimed at accelerating revenue growth and improving EBITDA margins. Expected EBITDA margin improvement coupled with normalizing capital expenditures will enhance the company's ability to deliver stronger free cash flow (FCF) metrics during 2014 and resulted in leverage that is within expectations for the current rating category.

Programming cost inflation represents a significant and likely permanent shift in CVC's cost structure. CVC expects high single-digit programming cost inflation will remain into 2014. Positively, in addition to ongoing pricing initiatives put in place during the first half of 2013, CVC's continuing operating cost initiatives partially offset the cost inflation by driving costs out of other parts of its cost structure through reducing the transaction volume of its business and improving operational efficiencies. These actions have resulted in CVC's LTM EBITDA margin expanding 307 basis points to 28.9% during second-quarter 2014 (2Q'14) relative to the same period last year, excluding discontinued operations. The company anticipates tempered EBITDA growth during the second half of 2014 but expects growth in the mid-to-high single digits for the full year in 2014. However, Fitch does not believe that the operating margin of CVC's core cable segment will return to historical levels and CVC's EBITDA margins continue to lag its peer group.

CVC anticipates capex will remain elevated at a level similar to 2013. Fitch expects capex priorities will continue to include the expansion of CVC's Wi-Fi network overlay both in and out of the home during 2014. Additionally, the company has upgraded its cable head-ends to facilitate the launch of its Multi-Room DVR service - CVC's remote storage or cloud-based DVR service. Nonetheless Fitch anticipates the improvements in CVC's operating profile will allow the company to offset higher, but stabilizing, capital spending and enable the company to generate growing levels of FCF during the rating horizon. Fitch believes CVC's FCF margin will approximate 3% of revenues as of year-end 2015 and grow to 5% by year-end 2016.

CVC's financial strategy is centered on opportunistically reducing debt and improving its credit profile. The company utilized cash from asset sales and litigation settlements to reduce outstanding debt and ended 2Q'14 with consolidated leverage of 5.4x, which is an improvement from 6.0x as of June 30, 2013 (excluding discontinued operations). Fitch expects initiatives to improve operational efficiency and ongoing pricing actions will expand EBITDA margins modestly during 2014 and 2015. The operating initiatives and debt reduction should strengthen credit protection metrics. Fitch believes CVC's leverage metric will range between 5.3x and 5.5x at year-end 2014 and approach 5.2x as of year-end 2015.

Fitch considers CVC's liquidity position and overall financial flexibility to be adequate given the current rating. The company's liquidity position is supported by cash on hand totaling $907 million as of June 30, 2014 and available borrowing capacity from CSCH's $1.5 billion revolver expiring April 2018. Fitch expects CVC's financial flexibility will strengthen in line with its improving operating profile and FCF generation.

CVC extended its maturity profile and reduced the volume of maturities between 2014 and 2017 after refinancing its credit facility in April 2013. The company also reduced its annual term loan amortization payments after issuing $750 million of senior notes due 2024 to prepay a portion of its term loan B in May 2014. Scheduled maturities (excluding collateralized monetization transactions) consist of $32 million during the remainder of 2014, $64 million during 2015 and $568 million in 2016.

CVC's conservative posture related to its share repurchase program, while maintaining a consistent dividend is positive for the company's credit profile. The company did not repurchase any shares during 2013 or in the first half of 2014 (versus $188.6 million in 2012). As of June 30, 2014, CVC had $455.3 million of availability remaining under its stock repurchase program.

The upgrade of CVC's senior unsecured debt is supported by stronger recovery prospects through an improving credit profile and a capital structure less reliant on secured debt.

RATING SENSITIVITIES:

Future developments that may, individually or collectively, lead to a positive rating action include:

--Further strengthening of the company's credit profile and a sustained reduction of leverage to below 4.5x;

--Clear indications that pricing and cost reduction initiatives are producing desired revenue growth acceleration and EBITDA margin expansion;

--Positive FCF generation exceeding 5% of consolidated revenues;

--FCF as a percentage of adjusted debt with equity credit exceeding 4%;

--Cablevision demonstrating that its operating profile will not materially decline in the face of competition.

Negative ratings actions would likely coincide with:

--The company's inability to realize the expected benefits of its operating strategies and strengthen its operating profile. Specifically, Fitch will be looking for mid-single-digit ARPU growth, cable segment operating margins returning to the mid 30% range and positive FCF generation;

--Fitch's belief that CVC's consolidated leverage will remain above 5.5x in the absence of a clear path to de-lever the company will likely spur a negative rating action;

--Although not anticipated in the near term, the re-initiation of aggressive share repurchases while leverage remains elevated.

Fitch has affirmed the following ratings with a Stable Outlook:

Cablevision Systems Corporation

--IDR at 'BB-'.

CSC Holdings, LLC

--IDR at 'BB-';

--Senior secured credit facility at 'BB+';

--Senior unsecured debt at 'BB'.

Fitch has upgraded the following ratings:

Cablevision Systems Corporation

--Senior unsecured debt to 'B+' from 'B-'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (May 28, 2014);

--'Rating Telecom Companies' (Aug. 9, 2012).

Applicable Criteria and Related Research:

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

Rating Telecom Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682323

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=848734

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
You think you know what’s in your data. But do you? Most organizations are now aware of the business intelligence represented by their data. Data science stands to take this to a level you never thought of – literally. The techniques of data science, when used with the capabilities of Big Data technologies, can make connections you had not yet imagined, helping you discover new insights and ask new questions of your data. In his session at @ThingsExpo, Sarbjit Sarkaria, data science team lead ...
The IoT has the potential to create a renaissance of manufacturing in the US and elsewhere. In his session at 18th Cloud Expo, Florent Solt, CTO and chief architect of Netvibes, will discuss how the expected exponential increase in the amount of data that will be processed, transported, stored, and accessed means there will be a huge demand for smart technologies to deliver it. Florent Solt is the CTO and chief architect of Netvibes. Prior to joining Netvibes in 2007, he co-founded Rift Technol...
If there is anything we have learned by now, is that every business paves their own unique path for releasing software- every pipeline, implementation and practices are a bit different, and DevOps comes in all shapes and sizes. Software delivery practices are often comprised of set of several complementing (or even competing) methodologies – such as leveraging Agile, DevOps and even a mix of ITIL, to create the combination that’s most suitable for your organization and that maximize your busines...
Struggling to keep up with increasing application demand? Learn how Platform as a Service (PaaS) can streamline application development processes and make resource management easy.
New Relic, Inc. has announced a set of new features across the New Relic Software Analytics Cloud that offer IT operations teams increased visibility, and the ability to diagnose and resolve performance problems quickly. The new features further IT operations teams’ ability to leverage data and analytics, as well as drive collaboration and a common, shared understanding between teams. Software teams are under pressure to resolve performance issues quickly and improve availability, as the comple...
The proper isolation of resources is essential for multi-tenant environments. The traditional approach to isolate resources is, however, rather heavyweight. In his session at 18th Cloud Expo, Igor Drobiazko, co-founder of elastic.io, will draw upon their own experience with operating a Docker container-based infrastructure on a large scale and present a lightweight solution for resource isolation using microservices. He will also discuss the implementation of microservices in data and applicat...
Join IBM June 8 at 18th Cloud Expo at the Javits Center in New York City, NY, and learn how to innovate like a startup and scale for the enterprise. You need to deliver quality applications faster and cheaper, attract and retain customers with an engaging experience across devices, and seamlessly integrate your enterprise systems. And you can't take 12 months to do it.
See storage differently! Storage performance problems have only gotten worse and harder to solve as applications have become largely virtualized and moved to a cloud-based infrastructure. Storage performance in a virtualized environment is not just about IOPS, it is about how well that potential performance is guaranteed to individual VMs for these apps as the number of VMs keep going up real time. In his session at 18th Cloud Expo, Dhiraj Sehgal, in product and marketing at Tintri, will discu...
Machine Learning helps make complex systems more efficient. By applying advanced Machine Learning techniques such as Cognitive Fingerprinting, wind project operators can utilize these tools to learn from collected data, detect regular patterns, and optimize their own operations. In his session at 18th Cloud Expo, Stuart Gillen, Director of Business Development at SparkCognition, will discuss how research has demonstrated the value of Machine Learning in delivering next generation analytics to im...
This is not a small hotel event. It is also not a big vendor party where politicians and entertainers are more important than real content. This is Cloud Expo, the world's longest-running conference and exhibition focused on Cloud Computing and all that it entails. If you want serious presentations and valuable insight about Cloud Computing for three straight days, then register now for Cloud Expo.
As you respond to increasing requests for new analytics, you need fast and flexible technology in your arsenal so that you can deploy the right workload to the right platform for the need at hand. Do you need self-service and fast time to value? Do you have data and application control and privacy needs, along with strict SLAs to meet? IBM dashDB™ is data warehouse technology powered by in-memory computing and in-database analytics that are designed for fast results, scalability and more.
SYS-CON Events announced today that SoftLayer, an IBM Company, has been named “Gold Sponsor” of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. SoftLayer, an IBM Company, provides cloud infrastructure as a service from a growing number of data centers and network points of presence around the world. SoftLayer’s customers range from Web startups to global enterprises.
So, you bought into the current machine learning craze and went on to collect millions/billions of records from this promising new data source. Now, what do you do with them? Too often, the abundance of data quickly turns into an abundance of problems. How do you extract that "magic essence" from your data without falling into the common pitfalls? In her session at @ThingsExpo, Natalia Ponomareva, Software Engineer at Google, will provide tips on how to be successful in large scale machine lear...
Up until last year, enterprises that were looking into cloud services usually undertook a long-term pilot with one of the large cloud providers, running test and dev workloads in the cloud. With cloud’s transition to mainstream adoption in 2015, and with enterprises migrating more and more workloads into the cloud and in between public and private environments, the single-provider approach must be revisited. In his session at 18th Cloud Expo, Yoav Mor, multi-cloud solution evangelist at Cloudy...
IoT device adoption is growing at staggering rates, and with it comes opportunity for developers to meet consumer demand for an ever more connected world. Wireless communication is the key part of the encompassing components of any IoT device. Wireless connectivity enhances the device utility at the expense of ease of use and deployment challenges. Since connectivity is fundamental for IoT device development, engineers must understand how to overcome the hurdles inherent in incorporating multipl...