|By Business Wire||
|August 11, 2014 11:29 AM EDT||
Fitch Ratings has affirmed the 'BB-' Issuer Default Rating (IDR) assigned to Cablevision Systems Corporation (CVC) and its wholly owned subsidiary CSC Holdings, LLC (CSCH). In addition, Fitch has affirmed specific issue ratings assigned to CSCH and upgraded CVC's senior unsecured notes to 'B+' as outlined below.
The Rating Outlook for CVC and CSCH's ratings has been revised to Stable from Negative.
As of June 30, 2014, CVC had approximately $9.9 billion of debt outstanding on a consolidated basis.
KEY RATING DRIVERS
--The company's operating strategies and investments, coupled with pricing actions, have translated into an improving operating profile as evidenced by expanding cable segment EBITDA margins and ARPU growth;
--The Stable Outlook incorporates Fitch's expectation that CVC's credit profile will continue to strengthen in step with its improving operating profile and its ability to generate meaningful levels of free cash flow (FCF);
--Fitch expects ongoing initiatives and investments to improve operational efficiency and customer experience, together with pricing actions, will modestly improve core cable segment EBITDA margins during the rating horizon, which taken together with opportunistic debt reduction supports the current ratings;
--Fitch expects CVC will maintain a conservative approach to capital allocation as the company's operating profile continues to strengthen.
The Stable Outlook incorporates Fitch's belief that CVC's credit profile, while weakly positioned within the current rating, will continue to strengthen in step with anticipated improvement of its operating profile. This is the result of its attempts to offset rising programming and employee compensation costs with price increases and operational efficiency initiatives aimed at accelerating revenue growth and improving EBITDA margins. Expected EBITDA margin improvement coupled with normalizing capital expenditures will enhance the company's ability to deliver stronger free cash flow (FCF) metrics during 2014 and resulted in leverage that is within expectations for the current rating category.
Programming cost inflation represents a significant and likely permanent shift in CVC's cost structure. CVC expects high single-digit programming cost inflation will remain into 2014. Positively, in addition to ongoing pricing initiatives put in place during the first half of 2013, CVC's continuing operating cost initiatives partially offset the cost inflation by driving costs out of other parts of its cost structure through reducing the transaction volume of its business and improving operational efficiencies. These actions have resulted in CVC's LTM EBITDA margin expanding 307 basis points to 28.9% during second-quarter 2014 (2Q'14) relative to the same period last year, excluding discontinued operations. The company anticipates tempered EBITDA growth during the second half of 2014 but expects growth in the mid-to-high single digits for the full year in 2014. However, Fitch does not believe that the operating margin of CVC's core cable segment will return to historical levels and CVC's EBITDA margins continue to lag its peer group.
CVC anticipates capex will remain elevated at a level similar to 2013. Fitch expects capex priorities will continue to include the expansion of CVC's Wi-Fi network overlay both in and out of the home during 2014. Additionally, the company has upgraded its cable head-ends to facilitate the launch of its Multi-Room DVR service - CVC's remote storage or cloud-based DVR service. Nonetheless Fitch anticipates the improvements in CVC's operating profile will allow the company to offset higher, but stabilizing, capital spending and enable the company to generate growing levels of FCF during the rating horizon. Fitch believes CVC's FCF margin will approximate 3% of revenues as of year-end 2015 and grow to 5% by year-end 2016.
CVC's financial strategy is centered on opportunistically reducing debt and improving its credit profile. The company utilized cash from asset sales and litigation settlements to reduce outstanding debt and ended 2Q'14 with consolidated leverage of 5.4x, which is an improvement from 6.0x as of June 30, 2013 (excluding discontinued operations). Fitch expects initiatives to improve operational efficiency and ongoing pricing actions will expand EBITDA margins modestly during 2014 and 2015. The operating initiatives and debt reduction should strengthen credit protection metrics. Fitch believes CVC's leverage metric will range between 5.3x and 5.5x at year-end 2014 and approach 5.2x as of year-end 2015.
Fitch considers CVC's liquidity position and overall financial flexibility to be adequate given the current rating. The company's liquidity position is supported by cash on hand totaling $907 million as of June 30, 2014 and available borrowing capacity from CSCH's $1.5 billion revolver expiring April 2018. Fitch expects CVC's financial flexibility will strengthen in line with its improving operating profile and FCF generation.
CVC extended its maturity profile and reduced the volume of maturities between 2014 and 2017 after refinancing its credit facility in April 2013. The company also reduced its annual term loan amortization payments after issuing $750 million of senior notes due 2024 to prepay a portion of its term loan B in May 2014. Scheduled maturities (excluding collateralized monetization transactions) consist of $32 million during the remainder of 2014, $64 million during 2015 and $568 million in 2016.
CVC's conservative posture related to its share repurchase program, while maintaining a consistent dividend is positive for the company's credit profile. The company did not repurchase any shares during 2013 or in the first half of 2014 (versus $188.6 million in 2012). As of June 30, 2014, CVC had $455.3 million of availability remaining under its stock repurchase program.
The upgrade of CVC's senior unsecured debt is supported by stronger recovery prospects through an improving credit profile and a capital structure less reliant on secured debt.
Future developments that may, individually or collectively, lead to a positive rating action include:
--Further strengthening of the company's credit profile and a sustained reduction of leverage to below 4.5x;
--Clear indications that pricing and cost reduction initiatives are producing desired revenue growth acceleration and EBITDA margin expansion;
--Positive FCF generation exceeding 5% of consolidated revenues;
--FCF as a percentage of adjusted debt with equity credit exceeding 4%;
--Cablevision demonstrating that its operating profile will not materially decline in the face of competition.
Negative ratings actions would likely coincide with:
--The company's inability to realize the expected benefits of its operating strategies and strengthen its operating profile. Specifically, Fitch will be looking for mid-single-digit ARPU growth, cable segment operating margins returning to the mid 30% range and positive FCF generation;
--Fitch's belief that CVC's consolidated leverage will remain above 5.5x in the absence of a clear path to de-lever the company will likely spur a negative rating action;
--Although not anticipated in the near term, the re-initiation of aggressive share repurchases while leverage remains elevated.
Fitch has affirmed the following ratings with a Stable Outlook:
Cablevision Systems Corporation
--IDR at 'BB-'.
CSC Holdings, LLC
--IDR at 'BB-';
--Senior secured credit facility at 'BB+';
--Senior unsecured debt at 'BB'.
Fitch has upgraded the following ratings:
Cablevision Systems Corporation
--Senior unsecured debt to 'B+' from 'B-'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (May 28, 2014);
--'Rating Telecom Companies' (Aug. 9, 2012).
Applicable Criteria and Related Research:
Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage
Rating Telecom Companies
The 4th International DevOps Summit, co-located with16th International Cloud Expo – being held June 9-11, 2015, at the Javits Center in New York City, NY – announces that its Call for Papers is now open. Born out of proven success in agile development, cloud computing, and process automation, DevOps is a macro trend you cannot afford to miss. From showcase success stories from early adopters and web-scale businesses, DevOps is expanding to organizations of all sizes, including the world's large...
Nov. 27, 2014 06:00 PM EST Reads: 1,654
15th Cloud Expo, which took place Nov. 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA, expanded the conference content of @ThingsExpo, Big Data Expo, and DevOps Summit to include two developer events. IBM held a Bluemix Developer Playground on November 5 and ElasticBox held a Hackathon on November 6. Both events took place on the expo floor. The Bluemix Developer Playground, for developers of all levels, highlighted the ease of use of Bluemix, its services and functionalit...
Nov. 27, 2014 06:00 PM EST Reads: 1,041
Some developers believe that monitoring is a function of the operations team. Some operations teams firmly believe that monitoring the systems they maintain is sufficient to run the business successfully. Most of them are wrong. The complexity of today's applications have gone far and beyond the capabilities of "traditional" system-level monitoring tools and approaches and requires much broader knowledge of business and applications as a whole. The goal of DevOps is to connect all aspects of app...
Nov. 27, 2014 06:00 PM EST Reads: 915
SAP is delivering break-through innovation combined with fantastic user experience powered by the market-leading in-memory technology, SAP HANA. In his General Session at 15th Cloud Expo, Thorsten Leiduck, VP ISVs & Digital Commerce, SAP, discussed how SAP and partners provide cloud and hybrid cloud solutions as well as real-time Big Data offerings that help companies of all sizes and industries run better. SAP launched an application challenge to award the most innovative SAP HANA and SAP HANA...
Nov. 27, 2014 05:00 PM EST Reads: 1,228
When an enterprise builds a hybrid IaaS cloud connecting its data center to one or more public clouds, security is often a major topic along with the other challenges involved. Security is closely intertwined with the networking choices made for the hybrid cloud. Traditional networking approaches for building a hybrid cloud try to kludge together the enterprise infrastructure with the public cloud. Consequently this approach requires risky, deep "surgery" including changes to firewalls, subnets...
Nov. 27, 2014 04:45 PM EST Reads: 1,071
Want to enable self-service provisioning of application environments in minutes that mirror production? Can you automatically provide rich data with code-level detail back to the developers when issues occur in production? In his session at DevOps Summit, David Tesar, Microsoft Technical Evangelist on Microsoft Azure and DevOps, will discuss how to accomplish this and more utilizing technologies such as Microsoft Azure, Visual Studio online, and Application Insights in this demo-heavy session.
Nov. 27, 2014 04:45 PM EST Reads: 1,027
DevOps is all about agility. However, you don't want to be on a high-speed bus to nowhere. The right DevOps approach controls velocity with a tight feedback loop that not only consists of operational data but also incorporates business context. With a business context in the decision making, the right business priorities are incorporated, which results in a higher value creation. In his session at DevOps Summit, Todd Rader, Solutions Architect at AppDynamics, discussed key monitoring techniques...
Nov. 27, 2014 04:30 PM EST Reads: 1,076
Cultural, regulatory, environmental, political and economic (CREPE) conditions over the past decade are creating cross-industry solution spaces that require processes and technologies from both the Internet of Things (IoT), and Data Management and Analytics (DMA). These solution spaces are evolving into Sensor Analytics Ecosystems (SAE) that represent significant new opportunities for organizations of all types. Public Utilities throughout the world, providing electricity, natural gas and water,...
Nov. 27, 2014 04:00 PM EST Reads: 1,165
The security devil is always in the details of the attack: the ones you've endured, the ones you prepare yourself to fend off, and the ones that, you fear, will catch you completely unaware and defenseless. The Internet of Things (IoT) is nothing if not an endless proliferation of details. It's the vision of a world in which continuous Internet connectivity and addressability is embedded into a growing range of human artifacts, into the natural world, and even into our smartphones, appliances, a...
Nov. 27, 2014 04:00 PM EST Reads: 1,558
How do APIs and IoT relate? The answer is not as simple as merely adding an API on top of a dumb device, but rather about understanding the architectural patterns for implementing an IoT fabric. There are typically two or three trends: Exposing the device to a management framework Exposing that management framework to a business centric logic Exposing that business layer and data to end users. This last trend is the IoT stack, which involves a new shift in the separation of what stuff happe...
Nov. 27, 2014 03:00 PM EST Reads: 1,191
The 3rd International Internet of @ThingsExpo, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that its Call for Papers is now open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
Nov. 27, 2014 03:00 PM EST Reads: 778
The Internet of Things is tied together with a thin strand that is known as time. Coincidentally, at the core of nearly all data analytics is a timestamp. When working with time series data there are a few core principles that everyone should consider, especially across datasets where time is the common boundary. In his session at Internet of @ThingsExpo, Jim Scott, Director of Enterprise Strategy & Architecture at MapR Technologies, discussed single-value, geo-spatial, and log time series dat...
Nov. 27, 2014 03:00 PM EST Reads: 1,401
An entirely new security model is needed for the Internet of Things, or is it? Can we save some old and tested controls for this new and different environment? In his session at @ThingsExpo, New York's at the Javits Center, Davi Ottenheimer, EMC Senior Director of Trust, reviewed hands-on lessons with IoT devices and reveal a new risk balance you might not expect. Davi Ottenheimer, EMC Senior Director of Trust, has more than nineteen years' experience managing global security operations and asse...
Nov. 27, 2014 01:00 PM EST Reads: 1,597
The Internet of Things will greatly expand the opportunities for data collection and new business models driven off of that data. In her session at @ThingsExpo, Esmeralda Swartz, CMO of MetraTech, discussed how for this to be effective you not only need to have infrastructure and operational models capable of utilizing this new phenomenon, but increasingly service providers will need to convince a skeptical public to participate. Get ready to show them the money!
Nov. 27, 2014 11:00 AM EST Reads: 1,205
The Internet of Things will put IT to its ultimate test by creating infinite new opportunities to digitize products and services, generate and analyze new data to improve customer satisfaction, and discover new ways to gain a competitive advantage across nearly every industry. In order to help corporate business units to capitalize on the rapidly evolving IoT opportunities, IT must stand up to a new set of challenges. In his session at @ThingsExpo, Jeff Kaplan, Managing Director of THINKstrateg...
Nov. 27, 2014 10:00 AM EST Reads: 1,167