Reuters logo
TEXT-Fitch affirms Mediacom, Mediacom Broadband IDR at 'B+'
March 1, 2012 / 4:40 PM / 6 years ago

TEXT-Fitch affirms Mediacom, Mediacom Broadband IDR at 'B+'

 (The following statement was released by the rating agency)	
 March 1 - Fitch Ratings has affirmed the 'B+' Issuer Default Rating
(IDR) assigned to Mediacom LLC (LLC) and Mediacom Broadband LLC (Broadband).
Both LLC and Broadband are wholly owned subsidiaries of Mediacom Communications
Corporation (Mediacom). The Rating Outlook is Stable. As of Sept. 30, 2011,
Mediacom had approximately $3.6 billion of debt outstanding including $1.6
billion at LLC and $2 billion at Broadband. A complete list of ratings being
affirmed is provided at the end of this release.	
	
Central to the affirmation of Mediacom's ratings is Fitch's ongoing expectation
that the company will utilize free cash flow generation to reduce outstanding
debt. Debt outstanding increased 6.4% relative to year-end 2010 to approximately
$3.6 billion as of Sept. 30, 2011. The higher debt is within Fitch's
expectations for the rating and is attributable to the funding requirements
related to the privatization transaction completed in March 2011. The
anticipated debt reduction coupled with modest operational improvement will
strengthen credit protection metrics to a level more consistent with the current
rating category with leverage trending below 6 times (x). Fitch estimates
year-end 2011 leverage improved to 6x and 5.8x for LLC and Broadband
respectively, and expects leverage will strengthen by year-end 2012 to 5.8x and
5.6x for LLC and Broadband respectively provided that each company uses its free
cash flow to reduce outstanding debt.	
	
Rating concerns center on the company's high leverage relative to its peer group
and other larger cable multiple system operators (MSOs), a comparatively weaker
subscriber clustering profile and service penetration rates that lag behind
industry leaders, and Medicom's ability to maintain its competitive position
relative to the threat posed by the direct broadcast satellite (DBS) operators.
Fitch acknowledges potential growth and operating profile enhancements that can
be captured by increasing service penetration levels as well as capitalizing on
commercial revenue growth potential.	
	
Additional concerns center on Mediacom's ability to grow retail revenues beyond
the company's core 'triple-play' service offering. Fitch points out that event
risks related to how Mediacom intends to use existing borrowing capacity on its
revolvers and free cash flow generation are elevated within the company's
overall credit profile.	
	
Mediacom's liquidity position is sufficient given the current rating and is
primarily supported by expected free cash flow generation and the aggregate
available borrowing capacity from subsidiary revolving credit facilities, which
totaled approximately $138 million when adjusted for recent capital market
activity. LLC's revolver is scheduled to expire in December 2014 while
Broadband's revolver will expire in December 2016 (subject to certain
exceptions). The company also benefits from a favorable maturity schedule
consisting of mandatory amortization from subsidiary credit facilities totaling
$23 million during 2012 and 2013.	
	
In aggregate, LLC and Broadband generated approximately $161 million of free
cash flow (defined as cash from operations less capital expenditures and
dividends) during the latest 12 months (LTM) period ended Sept. 30, 2011. Fitch
believes the company's relatively stable operating profile, characterized by
steady operating margins and consistent capital intensity levels, enable the
company to produce consistent levels of free cash flow over the ratings horizon.	
	
Positive rating actions would be contemplated if leverage declines below 5x,
strengthens free cash flow generation, and the company demonstrates progress in
closing gaps relative to its industry peers on service penetration rates and
strategic bandwidth initiatives. Fitch believes that negative rating actions
would likely coincide with a leveraging or shareholder-friendly transaction that
increases leverage beyond 6.5x without a clear path to de-leverage, the adoption
of a more aggressive financial strategy, or a perceived weakening of Mediacom's
competitive position.	
	
Fitch has affirmed the following ratings with a Stable Rating Outlook:	
	
Mediacom Broadband LLC	
--IDR at 'B+';	
--Senior unsecured 'B/RR5'.	
	
Mediacom LLC	
--IDR at 'B+';	
--Senior unsecured at 'B/RR5'.	
	
Mediacom Illinois LLC	
Mediacom Arizona LLC	
Mediacom Indiana LLC	
Mediacom California LLC	
Mediacom Minnesota LLC	
Mediacom Delaware LLC	
Mediacom Wisconsin LLC	
Mediacom Southeast LLC	
Mediacom Iowa LLC	
Zylstra Communications Corporation	
--IDR at 'B+';	
--Senior secured at 'BB+/RR1'.	
	
MCC Georgia, LLC	
MCC Illinois, LLC	
MCC Iowa, LLC	
MCC Missouri, LLC	
--IDR at 'B+';	
--Senior secured at 'BB+/RR1'.	
	
The following rating has been withdrawn:	
	
Mediacom Communications Corporation	
--IDR 'B+'.	
	
Additional information is available at 'www.fitchratings.com'. The issuer did
not participate in the ratings process, or provide additional information,
beyond the issuer's available public disclosure.	
	
The ratings above were unsolicited and have been provided by Fitch as a service
to investors.	
	
Applicable Criteria and Related Research:	
	
--'Corporate Rating Methodology' (Aug. 12, 2011);	
--'Rating Global Telecoms Companies' (Sept. 16, 2010).	
	
Applicable Criteria and Related Research:	
Corporate Rating Methodology	
Rating Global Telecoms Companies - Sector Credit Factors	
	
 (New York Ratings Team)	
 

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below