A combination of rising program costs and continued focus on investments in operations is preventing Cablevision Systems Corporation to get into Moody’s leverage comfort zone as quickly as was once anticipated. The resulting adjustment to the company’s outlook is not pretty.
The company’s Corporate Family Rating of Ba2 is unchanged in the wake of its proposed new credit facility; however, Moody’s outlook has deteriorated to negative.
Moody’s is looking for improvement of the company’s 5.6x leverage position as of the end of 2012, in addition to improvement of its cash flow results, which were negative for the year.
A new aggressive policy of price increases is expected to help, but not enough to offset anticipated expense licensing programming. The company is expected to continue investing in itself, which will also put strain on its ability to decrease leverage, and further, the plan to raise prices also increases its credit risk.
Much of the company’s trouble is from the force majeure category – more than any other MVPD, it was impacted by Hurricane Sandy.
Looking ahead, Moody’s stated, “Cablevision has demonstrated some effort to mitigate the operational challenges with fiscal policy and could further improve its credit profile, though the willingness to do so is still uncertain. Cablevision reduced its share repurchase in 2012 compared to prior years, held its dividend flat for 2011, 2012, and 2013 (to date), and applied approximately $275 million of the approximately $350 million of cash it received following a settlement of litigation with DISH Network LLC to debt reduction. In the second half of this year the company will likely receive at least $600 million of cash from the sale of Bresnan Broadband Holdings LLC, enabling the potential for more debt repayment.”