S&P rates Charter loan

Standard & Poor's said it assigned its B bank loan rating and a recovery rating of 1 to the amended and restated $6.5 billion senior secured credit facilities of Charter Communications Operating LLC.

At the same time, a B- rating and a recovery rating of 1 were assigned to the proposed $1.5 billion senior second-lien notes due 2014, being offered under Rule 144A with registration rights by Charter Communications Operating LLC and Charter Communications Operating Capital Corp.

The issuers are indirect subsidiaries of cable television system operator Charter Communications Inc. (CCC+/developing/--) and are analyzed on a consolidated basis with that entity.

Proceeds from the notes, together with about $5.1 billion in borrowings under the amended credit facilities, will be used to repay the roughly $2.4 billion aggregate outstanding amount under the senior secured credit facilities of Charter subsidiaries CC VI Operating Co. LLC, Falcon Cable Communications LLC, and CC VIII Operating LLC.

The existing ratings on Charter and all related entities were affirmed.

S&P said the ratings on Charter continue to reflect high financial risk from elevated leverage due to acquisition- and capital spending-related debt, and uncertain intermediate-term likelihood of meaningful free cash flow generation. The company also faces considerable operating challenges from weak video subscriber trends and its limited ability to raise prices because of intense satellite TV competition.

These factors are partly mitigated by a good business risk profile from Charter's position as the dominant provider of pay TV services in its markets, respectable EBITDA margins, strong growth in high-speed data services, opportunities for increased cash flow from other advanced digital services, scale benefits from a large subscriber base totaling roughly 6.2 million, and healthy system asset values.

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