Charter is ‘comfortable’ with leverage in high end of targeted range

By Devika Patel

Knoxville, Tenn., Oct. 30 – Charter Communications Inc. management is content with the company’s leverage, which is in the high end of its target range of 4x to 4.5x.

“We remain comfortable in the middle to high end of our target leverage range of 4x to 4.5x,” chief financial officer Christopher L. Winfrey said on the company’s third quarter ended Sept. 30 earnings conference call on Friday.

As of the end of the third quarter, Charter’s net debt to last 12-month adjusted EBITDA was 4.3x or 4.2x, if you look at cable only, he said.

Last quarter, the company repaid CCO Holdings, LLC’s 5 7/8% senior notes due 2024, using proceeds from a July deal, in which CCO Holdings and CCO Holdings Capital Corp. jointly issued $3 billion of 4¼% senior unsecured notes due 2031. The proceeds were used for general corporate purposes, including repaying debt, including the 5 7/8% notes due 2024, as well as funding buybacks of class A common stock and/or common units.

This quarter, Charter plans to repay CCO Holdings’ 5 3/8% senior notes due May 1, 2025, using proceeds from an October deal in which CCO Holdings and CCO Holdings Capital Corp. jointly issued an additional $1.5 billion of its 4½% senior unsecured notes due 2032. The proceeds will be used for general corporate purposes, including repaying debt, including the 5 3/8% notes due 2025, as well as funding buybacks of class A common stock and/or common units.

“Earlier this month, we issued $1.5 billion of 12-year high-yield notes at a yield of roughly 4%,” Winfrey said on the call.

The company generated $1.8 billion of consolidated free cash flow in the third quarter, up about $500 million versus last year’s third quarter.

As of Sept. 30, total principal amount of debt was $79.1 billion and Charter's credit facilities provided approximately $4.7 billion of additional liquidity in excess of its $1,283,000,000 cash position.

On July 21, Charter priced a massively upsized $1.5 billion add-on to the CCO Holdings/CCO Holdings Capital 4¼% senior notes due Feb. 1, 2031 (B1/BB) at 102, resulting in a 4.015% yield to maturity in a drive-by.

The issue size increased from $500 million.

The issue price came on top of price talk.

Lead left bookrunner Morgan Stanley & Co. LLC billed and delivered. Joint bookrunners were Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, Mizuho Securities USA Inc., BofA Securities Inc., Goldman Sachs & Co. LLC, MUFG, RBC Capital Markets Corp., TD Securities (USA) LLC and Wells Fargo Securities LLC.

Proceeds were earmarked for general corporate purposes, including repayment of the existing senior notes (including the potential redemption of all the 5 7/8% senior notes due 2024), and to fund potential buybacks of Charter class A common stock or Charter Holdings common units.

On Oct. 7, the company priced an upsized $1.5 billion add-on to the CCO Holdings/CCO Holdings Capital 4½% senior notes due May 1, 2032 (existing ratings B1/BB/BB+) at 103.75.

The issue size increased from $1 billion.

The issue price came at the rich end of the 103.5 to 103.75 price talk.

Deutsche Bank Securities Inc. had the books.

The company originally priced $1.4 billion of the notes in March 2020. The total amount outstanding is now $2.9 billion.

The Stamford, Conn.-based telecommunications and mass media company earmarked the proceeds for general corporate purposes, including debt repayment, as well as to fund potential buybacks of class A common stock of Charter or common units of Charter Communications Holdings, LLC.

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