Radiate Holdco LLC Assigned #B# Rating And Stable Debt Ratings Assigned

Stocks and Financial Services Press Releases Tuesday November 29, 2016 09:05
NEW YORK--29 Nov--S&P Global Ratings
NEW YORK (S&P Global Ratings) Nov. 28, 2016--S&P Global Ratings today said it assigned its 'B' corporate credit rating to Delaware-based Radiate Holdco LLC. The outlook is stable.

We also assigned our 'B' issue-level rating and '3' recovery rating to Radiate's proposed $1.48 billion senior secured facilities, which consist of a $150 million revolving credit facility due 2021 and a $1.33 billion term loan due 2023. The '3' recovery rating indicates our expectation for meaningful recovery (50%-70%; higher end of the range) for lenders in the event of a payment default.

In addition, we assigned our 'CCC+' issue-level rating and '6' recovery rating to Radiate's proposed $495 million senior unsecured notes issuance due 2024. The '6' recovery rating indicates our expectation for negligible recovery (0%-10%) for lenders in the event of a payment default.

Radiate is the borrower acquiring Princeton, New Jersey-based cable TV overbuilder RCN and San Marcos, Texas-based cable TV overbuilder Grande. Radiate will use proceeds from the term loan, notes, and about $548 million in sponsor equity cash to fund the $2.25 billion acquisition, pay related fees and expenses, and return cash to balance sheet.

"The ratings reflect an aggressive financial policy employed by private-equity sponsor TPG Capital resulting in pro-forma leverage of about 6.5x, the company's market position as a cable overbuilder (an entity that builds over an existing cable operator's network and provides customers an alternative to the incumbent) with material competition in most of its markets, modest scale, and low profitability compared with its peers," said S&P Global Ratings credit analyst William Savage.

Revenue visibility from Radiate's subscription-based services, growing demand for broadband, and positive free operating cash flow (FOCF) partly offset these factors, however. We expect mid-single-digit EBITDA growth over the next two to three years, primarily due to higher bandwidth consumption and continued market share gains from DSL, which will offset video programming cost increases. This, combined with modest debt reduction should result in debt to EBITDA of around 6x by the end of 2017.

The stable outlook reflects our expectation for modest improvement in the company's credit measures over the next year, mainly because of earnings growth. We expect debt-to-EBITDA to be around 6x by 2017. However, we believe that re-leveraging is likely at some point given the aggressive financial policy employed by Radiate's private-equity owners.

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