Moody's keeps Cablevision on review

Moody's Investors Service is continuing a review for possible downgrade of the ratings for CSC Holdings, a subsidiary of Cablevision Systems Corp. following the announced sale of the Bravo network to NBC for about $1 billion.

The existing SGL-4 liquidity rating remains unchanged.

Although the proposed transaction confirms the high underlying value of the company's assets and potentially suggests more of a willingness to divest non-core assets, Moody's said these were never the focus of its concerns for the company.

Effectively, the transaction mostly constitutes a large stock buy-back, which will not likely benefit bondholders that much, if at all, even though it seems quite favorable from a stockholder's perspective.

Primary concerns continue to be a weak liquidity profile, which in Moody's opinion will not get much of a boost from the sale, the ability to monetize the GE shares that will be received as partial payment, the permanent repayment requirement for existing Rainbow Media debt and the willingness of the financial markets to replace existing credit facilities.

The anticipated deleveraging impact of the Bravo transaction, which on a cash basis may only translate into $200 million or less and reflects a more modest 6x multiple of cash flow being sold after debt reduction versus the estimated 23x multiple based on the full value of the transaction, will therefore be fairly immaterial to the overall company, which remains leveraged at more than 8x and growing.

Even though we continue to assert that loss severity in a default scenario would not be that material, if any losses were in fact realized, we need to get more comfortable that the probability of default is less than at present and as expected over the extended rating horizon in order to confirm the ratings and resolve the review.

Moody's confirms Providian

Moody's Investors Service confirmed the ratings of credit card issuer Providian Financial Corp. (senior at B2), concluding a review for possible downgrade begun in December 2001. The outlook is stable.

Moody's said confirmation reflects numerous actions Providian has taken to strengthen its financial position, including a number of portfolio sales and facility closings, and the adoption of more conservative underwriting and marketing strategies.

In addition, its bank subsidiaries remain in compliance with the regulatory agreements entered into a year ago and have maintained a solid liquidity and regulatory capital position despite significant challenges.

While Moody's expects earnings could come under greater pressure in the next two quarters as credit costs increase further, overall actions taken over the past year make it far more likely to survive near-term challenges ahead.

Notwithstanding all that, Moody's said Providian continues to face significant longer-term challenges, including limited access to funding.

Furthermore, the company faces major competitive challenges as it moves into the more traditional prime credit card market.

Fitch rates UnumProvident shelf

Fitch Ratings has assigned an indicative rating of A- to the senior unsecured debt securities under UnumProvident Corp.'s $1.5 billion universal shelf registration.

The outlook is stable.

S&P puts Westar on watch

Standard & Poor's put Westar Energy Inc. on CreditWatch with negative implications. Ratings affected include Westar's first mortgage bonds at BBB-, senior notes and convertible senior notes at BB- and preferred stock and quarterly income preferred securities at B+ and Kansas Gas & Electric Co.'s first mortgage bonds at BB+ and secured facility bonds and secured lease obligation bonds at BB-.

S&P said the action reflects Westar's announcement that it will restate its first- and second-quarter 2002 financial statements to reflect an additional goodwill impairment at 88%-owned Protection One Alarm Monitoring Inc.

While the charge of $93 million, net of tax, is non-cash, is relatively small compared with the $657 million impairment charge already taken this year, and will not affect Westar's liquidity or violate any covenants, Westar's liberally leveraged capital structure cannot withstand additional decimation at the current ratings level, S&P said. Independent of the impairment restatement, Westar's 2001 and 2000 financials are required to be reaudited.

Westar's financial condition remains quite depressed. Funds from operations to total debt stands at just 10%, cash flow coverage at about 2.4 times and pretax interest coverage below 2.0x, S&P said. Due to aggressive use of debt financing and a series of write-offs, the company's common equity cushion is a lean 25% and debt to capital is about 73%.

Westar's plan to sell its ONEOK Inc. investment and use available proceeds to repay debt demonstrates an attempt by management to begin shoring up its balance sheet. S&P said it considers this a critical near-term goal in supporting the company's creditworthiness, despite reduction or elimination of the steady ONEOK dividends. However, uncertainty regarding the timing of, and exact proceeds from, the ONEOK sale, together with continued deterioration of Westar's already-frail capital structure, in addition to regulatory difficulties and investigations and subpoenas, are significant credit concerns especially in light of the company's tenuous bondholder protection measurements.

S&P says Cablevision unchanged

Standard & Poor's said Cablevision Systems Corp. ratings remain unchanged at BB for the corporate credit rating with a stable outlook.

S&P's comments follows Cablevision's announced agreement to sell its 80% share of the Bravo channel to NBC for $1 billion. Cablevision will receive a combination of GE and Cablevision stock, with the GE-related portion ranging from 45% to 67%, depending on Cablevision's stock price.

S&P said it expects Cablevision to monetize the roughly $450 million to $670 million of GE stock to reduce bank debt, including borrowings on its $2.4 billion revolving credit facility.

However, the company will lose roughly $55 million in annual operating cash flows from Bravo. Therefore, the overall deleveraging impact is minimal, S&P said.

Given the magnitude of capital and operating needs anticipated for 2003, Cablevision may not have sufficient funding beyond 2003 under its current financial plans, especially if it is not able to materially increase operating cash flows from its cable businesses in the 2002 to 2003 time frame, including cable modem, digital cable, and telephony services, as well as stem additional subscriber losses, S&P said.

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