S&P Rtgs For Cablevision Remain On Watch Neg>
December 21, 2004 16:15 ET (21:15 GMT)
21 Dec 2004 16:16 ET PRESS RELEASE
S&P: Cablevision Remains On Watch Neg
The following is a press release from Standard & Poor's:
NEW YORK (Standard & Poor's) Dec. 21, 2004--Standard & Poor's Ratings Services said today that its ratings for Cablevision Systems Corp. (BB/Watch Neg/--) and related entities remain on CreditWatch with negative implications. This CreditWatch update follows the company's 8K filing on Dec. 20, 2004, in which it indicated that its board of directors has decided to suspend pursuing the spin-off of its Rainbow Media Enterprise subsidiary in its previously announced form and instead pursue strategic alternatives for its Rainbow direct broadcast satellite (DBS) business.
"If Cablevision chooses to continue to own and operate the satellite business, its credit profile could be materially weakened," said Standard & Poor's credit analyst Catherine Cosentino. "Such weakening would be exacerbated if the company also pursued the launch of additional satellites."
Cablevision has already contracted with Lockheed Martin to construct five additional Ka-band satellites, with the aggregate cost expected to be about $740 million. However, the company has the right to terminate the agreement at any time, either in its entirety or with respect to individual satellites. Cablevision's overall business risk would be somewhat weaker if the satellite business is not spun off, as prospects for this business remain in doubt given the high degree of competition from DBS operators The DIRECTV Group Inc. and EchoStar Communications Corp., which collectively have about 24 million subscribers. Moreover, if the satellite business is discontinued in 2005, the company's credit profile could still be under some pressure due to the $1.4 billion of initial debt incurred by Cablevision's Rainbow National Services LLC subsidiary to fund the business and uncertainty about the potential alternative use of cash derived from these financings. Conversely, if the satellite business is spun off in a modified form that is materially similar to the previous plan, ratings would be affirmed with a positive outlook.
The ratings reflect Cablevision's relatively high ongoing level of consolidated debt to annualized EBITDA, which was about 7x for the three months ended Sept. 30, 2004 (including stock plan expense, adjusted for operating leases and financial guarantees, and excluding nonrecurring broadcast rights termination fees, a related liability reversal, and collateralized indebtedness), or nearly 8x on an annualized basis for the nine months ended Sept. 30, 2004. The company also faces increasing competition from DBS. However, Cablevision continues to benefit from the attractive demographics of its cable TV franchise area, which currently serves about 2.9 million customers. This base provides good potential for expansion of digital cable modem broadband and telephony services, all of which are expected to continue to be aggressively marketed.
December 21, 2004 16:15 ET (21:15 GMT)
21 Dec 2004 16:16 ET PRESS RELEASE
S&P: Cablevision Remains On Watch Neg
The following is a press release from Standard & Poor's:
NEW YORK (Standard & Poor's) Dec. 21, 2004--Standard & Poor's Ratings Services said today that its ratings for Cablevision Systems Corp. (BB/Watch Neg/--) and related entities remain on CreditWatch with negative implications. This CreditWatch update follows the company's 8K filing on Dec. 20, 2004, in which it indicated that its board of directors has decided to suspend pursuing the spin-off of its Rainbow Media Enterprise subsidiary in its previously announced form and instead pursue strategic alternatives for its Rainbow direct broadcast satellite (DBS) business.
"If Cablevision chooses to continue to own and operate the satellite business, its credit profile could be materially weakened," said Standard & Poor's credit analyst Catherine Cosentino. "Such weakening would be exacerbated if the company also pursued the launch of additional satellites."
Cablevision has already contracted with Lockheed Martin to construct five additional Ka-band satellites, with the aggregate cost expected to be about $740 million. However, the company has the right to terminate the agreement at any time, either in its entirety or with respect to individual satellites. Cablevision's overall business risk would be somewhat weaker if the satellite business is not spun off, as prospects for this business remain in doubt given the high degree of competition from DBS operators The DIRECTV Group Inc. and EchoStar Communications Corp., which collectively have about 24 million subscribers. Moreover, if the satellite business is discontinued in 2005, the company's credit profile could still be under some pressure due to the $1.4 billion of initial debt incurred by Cablevision's Rainbow National Services LLC subsidiary to fund the business and uncertainty about the potential alternative use of cash derived from these financings. Conversely, if the satellite business is spun off in a modified form that is materially similar to the previous plan, ratings would be affirmed with a positive outlook.
The ratings reflect Cablevision's relatively high ongoing level of consolidated debt to annualized EBITDA, which was about 7x for the three months ended Sept. 30, 2004 (including stock plan expense, adjusted for operating leases and financial guarantees, and excluding nonrecurring broadcast rights termination fees, a related liability reversal, and collateralized indebtedness), or nearly 8x on an annualized basis for the nine months ended Sept. 30, 2004. The company also faces increasing competition from DBS. However, Cablevision continues to benefit from the attractive demographics of its cable TV franchise area, which currently serves about 2.9 million customers. This base provides good potential for expansion of digital cable modem broadband and telephony services, all of which are expected to continue to be aggressively marketed.
