(This is a revision of a release issued Aug. 17, 2009. It corrects the
senior secured debt ratings for Mediacom's subsidiaries to 'BB' from 'BB-' .)
(The following statement was released by the rating agency)
Aug 19 - Fitch Ratings has affirmed the Issuer Default Rating (IDR) for
Mediacom Communications Corporation (MCCC.O) (Mediacom) and its wholly owned
subsidiaries Mediacom LLC (LLC) and Mediacom Broadband LLC (Broadband) at 'B'.
In addition, Fitch rates LLC's debt issuance as follows:
--9.125% senior notes due 2019 '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
--$300 million Senior secured term loan D 'BB/RR1'.
Approximately $3.4 billion of debt as of June 30, 2009 is affected. The
Rating Outlook for all of Mediacom's ratings is Stable.
Fitch's rating action follows LLC's announcement that the company launched
a cash tender offer for any and all of its 9.5% senior notes due 2013 and their
7.875% senior notes due 2011. The total amount outstanding under the notes is
$625 million as of June 30, 2009. The tender will be financed through a $350
million issuance of LLC's 9.125% senior notes due August 2019 and proceeds
received from a new $300 million term loan D. The term loan is expected to be
secured in a similar manner as the existing LLC credit facility and have the
same covenant package including the 6.0 times (x) total leverage covenant at
the borrower level of LLC's capital structure. From Fitch's perspective the
tender offer and the new financing is a positive for MCCC's overall credit
profile.
While debt levels remain relatively constant through the debt tender
process, the refinancing extends LLC's maturity profile. However the issuance
of term loan D increases the proportion of secured debt within LLC's debt
structure to over 77% (pro forma) versus 59% as of June 30, 2009, limiting the
amount of incremental secured debt LLC can incur at the 'RR1' recovery rating.
Overall Fitch's ratings for Mediacom reflect the company's high leverage
relative to its peer group. While acknowledging the positive operational
momentum experienced during the first half of 2009, MCCC's service penetration
levels and ARPU profile continue to trail industry leaders as well as
comparable rural orientated cable operators.
Fitch anticipates that MCCC's credit profile will strengthen within the
current ratings category during the course of 2009 as modest EBITDA growth
coupled with reduced capital expenditures is expected to yield positive free
cash flow (defined as cash flow from operations less capital expenditures)
during 2009.
During the first half of 2009 MCCC generated approximately $58.2 million of
free cash flow. Fitch believes that MCCC will use the free cash flow generation
during 2009 to retire approximately $64 million of scheduled amortization from
MCCC's subsidiary credit facilities during the remainder of 2009 resulting in
moderate de-leveraging of the company's balance sheet.
Total debt outstanding as of June 30, 2009 increased $54 million relative
to year end 2008 to $3.37 billion. However EBITDA growth experienced during the
first half of 2009 has lowered MCCC's leverage metric to 6.38x as of the LTM
period ended June 30, 2009, reflecting a modest improvement from 6.48x as of
year end 2008.
The incremental debt was used in part to fund the stock repurchase from
affiliates of Morris Communications Company, LLC. By year end 2009 Fitch
expects that MCCC's leverage metric will improve to 6.2x.
Mediacom's ratings are supported by a stable liquidity position, the key to
which is the available borrowing capacity from its subsidiary credit
facilities, which in aggregate totalled approximately $611.3 million as of June
30, 2009.
The remaining borrowing capacity from the revolvers combined with
anticipated free cash flow generation should, in Fitch's opinion, provide
sufficient flexibility to meet to meet Mediacom's liquidity requirements during
the ratings horizon, including approximately $187 million of credit facility
amortization scheduled during the remainder of 2009 and 2010. Fitch notes that
approximately $53 million of the company's available borrowing capacity from
its revolver will expire on March 31, 2010, and the remaining capacity is set
to expire during 2011 and 2012.
The 'RR1' recovery rating assigned to Mediacom LLC and Mediacom Broadband
LLC's subsidiary senior secured credit facilities indicates superior recovery
prospects, which are based on the asset coverage of these loans. The 'RR5'
recovery ratings assigned to the senior unsecured debt issued by Mediacom
Broadband and Mediacom LLC reflect the diminished recovery prospects of
bondholders at this level of the capital structure driven by the large amount
of senior secured debt ahead of these bonds in the capital structure.
The Stable Outlook incorporates Fitch's expectation that Mediacom's credit
profile will continue to improve during 2009 driven by relatively steady
operating metrics. Fitch anticipates that the current economic conditions and
competitive operating environment will translate into slower RGU growth for
Mediacom during 2009 likely resulting in a moderation of the company's revenue
and EBITDA growth rates as compared to 2008 levels. However, from Fitch's
perspective there is sufficient tolerance within Mediacom's current ratings to
withstand a slower growth profile. The Stable Outlook also reflects the absence
of aggressive share repurchase policy that will take management's focus off of
de-leveraging Mediacom's balance sheet.
Fitch has affirmed the following ratings with a Stable Outlook:
Mediacom Communications Corporation
--IDR at 'B'.
Mediacom Broadband LLC
--IDR at 'B';
--Senior unsecured 'B-/RR5'.
Mediacom LLC
--IDR at 'B';
--Senior unsecured '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 'BB/RR1'.
MCC Georgia, LLC
MCC Illinois, LLC
MCC Iowa, LLC
MCC Missouri, LLC
--IDR at 'B';
--Senior secured 'BB/RR1'.
Fitch has assigned the following new ratings:
Mediacom LLC
--Senior unsecured notes due 2019 '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
--Senior secured term loan D 'BB/RR1'.
