(Source: Business Wire)
Fitch Ratings has assigned a 'BBB' rating to Time Warner Cable's (TWC) benchmark size 30-year senior unsecured notes. The proceeds from the offering are expected to be used to repay a portion of the amount outstanding under TWC's senior unsecured credit facilities. As of March 31, 2009 $2.45 billion was outstanding under the company's $5.875 billion revolver and $3.045 billion was outstanding under the term loan facility. The revolver is scheduled to mature on Feb. 15, 2011 while the term loan is set to mature on Feb. 21, 2011. The notes will be guaranteed by Time Warner Entertainment Company, LP and TW NY Cable Holding, Inc. As of March 31, 2009, TWC had approximately $23.5 billion of debt outstanding.
Overall, Fitch's ratings reflect TWC's strong competitive position as the second largest cable multiple systems operator (fourth largest multi channel video program distributor) in the United States, strong subscriber clustering profile and the company's growing revenue diversity owing to the success of TWC's Triple play service offering and growing commercial business. Within the context of existing competitive pressures and weak economic conditions, the ratings incorporate Fitch's expectation that the company will continue to generate solid operating metrics, sustainable EBITDA and free cash flow growth over Fitch's rating horizon. From Fitch's perspective, TWC's scale and system clustering provide the company with competitive advantages in terms of driving higher operating efficiencies through its cable plant, taking cost out of customer premise equipment, lowering programming costs growth, and positioning the company to enhance its product offerings so that it can differentiate them from the competition's offering.
TWC's leverage, as expected, increased to 3.7 times (x) as of March 31, 2009 following the close of a series of transactions that formally separated TWC from Time Warner, Inc. (TWX) on March 12, 2009 and the incurrence of additional debt to fund the $10.9 billion special dividend. While TWC's current credit profile is weak within its rating category, Fitch expects that TWC will use a substantial portion of expected free cash flow generation to de-lever its balance sheet to a level more reflective of the company's current rating. TWC generated free cash flow of approximately $372 million during the first quarter of 2009 reflecting a 9.4% year over year increase. The free cash flow growth reported during the first quarter is notable given the 70% year over year increase in cash interest costs experienced during the quarter.
