Altice USA Inc. #B+# Rating Outlook Revised To Positive On Spin- Debt Ratings Assigned

Stocks and Financial Services Press Releases Thursday January 11, 2018 09:12
NEW YORK--11 Jan--S&P Global Ratings

NEW YORK (S&P Global Ratings) Jan. 10, 2018--S&P Global Ratings today revised the outlook to positive on the 'B+' corporate credit rating on Town of Oyster Bay, N.Y.-based cable provider Altice USA Inc. We also affirmed all existing debt ratings at subsidiaries.

At the same time, we assigned our 'BB' issue-level rating and '1' recovery rating to the company's proposed incremental term loan due 2026 issued at CSC Holdings LLC. The '1' recovery rating indicates expectations for very high recovery (90%-100%; rounded estimate: 95%). We also assigned our 'BB-' issue-level rating and '2' recovery rating to the company's guaranteed unsecured notes. The '2' recovery rating indicates our expectation for substantial recovery (70%-90%; rounded estimate: 85%) in the event of a payment default.

The existing guaranteed notes were also lowered to 'BB-' from 'BB' and revised the recovery rating to '2' from '1' due to the increase in priority claims. Following the same logic, we also lowered the issue-level rating on the company's unsecured notes (issued at CSC Holdings LLC) to 'B-' from 'B' and revised the recovery rating to '6' from '5'. The '6' recovery rating indicates our expectation of negligible (0%-10%; rounded estimate: 0%) recovery for lenders in the event of a payment default. The positive outlook revision is due to the proposed transaction that separates Altice USA from its European parent, Altice NV. As a result, we believe the longer-term probability for Altice USA to support European operations has been greatly reduced.

In addition, the company has articulated a desire to operate with a more conservative leverage target, will have more clearly defined executive roles after the spin-off, and has achieved solid operating performance on a standalone basis over the past year. Still, there is uncertainty around the company's financial policy as the company has instituted a $2 billion share repurchase program, we believe debt-financed acquisitions are a medium-term possibility, and the company does not have an established track record of operating within its leverage targets yet.

The positive outlook reflects our belief that Altice USA has the ability to delever to the low-5x area in 2018 through earnings growth through a combination of cost-cutting initiatives and high-margin broadband growth, which will likely offset competitive pressures in the video business. Still, uncertainty remains around the company's financial policy and we believe there is execution risk associated with its aggressive cost cutting strategy, which could result in market share losses if customer satisfaction erodes. We could raise the rating over the next year if the company continues to improve profitability and reduce leverage below 5.5x without a material deterioration in subscriber trends.

We would also need increased confidence that leverage would remain below this threshold on a sustained basis, even factoring in the potential for debt-financed acquisitions and/or shareholder returns. We could revise the outlook to stable if leverage remains above 5.5x over the next year to fund shareholder returns or acquisitions. Under our base-case operating scenario, this could be caused by share repurchases of about $1.5 billion-$2 billion or an acquisition of more than $5 billion in 2018 (although an improvement in business prospects could cause us to re-evaluate this threshold). Alternatively, we could take a negative rating action if FOCF declines substantially from broadband subscriber losses over the next year.


Latest Press Release

Photo Release: SEC hosts a seminar on business value and sustainability through active investors

SEC Secretary-General Rapee Sucharitakul (3rd from left), Dr. Prasarn Trairatvorakul (4th from left), Board of Directors of Thailand Sustainable Development Foundation, Mr. Jamie Allen (2nd from left), Secretary-General of the Asian Corporate Governance...

Phillip Spector Joins Phasor#s Board of Directors

Phasor, the leading developer of enterprise-grade electronically-steered antenna (ESA) systems for mobile broadband, announced today that satellite industry veteran and Satellite Hall of Fame member Phillip Spector has joined the Phasor Board of...

Circulate Capital Announces RFP Process For South and Southeast Asia-Based Businesses Seeking Capital to Accelerate Ocean Plastic Solutions

- New Impact Investment Management Firm to Finance Regional Waste Management and Recycling Solutions That Remediate and Prevent Ocean Plastic Circulate Capital, the investment management firm dedicated to financing companies, projects, and...

Photo Release: KBTG organizes TECHJAM 2018 nationwide, with over 2 million Baht in prizes up for grab

Mr. Somkid Jiranuntarat, Chairman of KASIKORN BUSINESS-TECHNOLOGY GROUP (KBTG), recently launched the TECHJAM 2018 competition, aimed at finding "Tomorrow Squad", which excels in Coding, Data Science and Design from four regions of Thailand before...

Mega Tech IPO: Asahi Marusan Management say Tencent-backed PDD eye $1.6 billion

Asahi Marusan Management reported this morning that Chinese e-commerce operator Pinduoduo Inc which is backed by Tencent Holdings is planning to raise up to $1.6 billion during its US IPO to bolster its fight against rival Alibaba. Pinduoduo Inc located...

Related Topics