Charter details debt commitments for Time Warner, Bright House buys

By Sara Rosenberg

New York, May 29 – Charter Communications Inc. outlined in an 8-K filed with the Securities and Exchange Commission on Friday the expected breakdown of the $30.5 billion of debt commitments received for its acquisitions of Time Warner Cable Inc. and Bright House Networks.

The expected debt structure includes a $1.7 billion incremental senior secured revolver, $15 billion of incremental senior secured term loans, $6 billion of senior secured first-lien notes, backed by a $6 billion senior secured first-lien bridge loan commitment, and $3.5 billion of senior unsecured notes, backed by a $3.5 billion senior unsecured bridge loan commitment.

Charter expects that two of three rating agencies will give its new secured loan and bonds investment-grade ratings.

Additionally, the company plans to issue $4.3 billion of senior unsecured notes at CCO Holdings LLC, which are backed by a $4.3 billion senior unsecured 364-day loan commitment, if Time Warner stockholders elect to receive $115 in cash and shares of a new public parent company (New Charter) equivalent to 0.4562 shares of Charter common stock.

Time Warner stockholders also have the option for $100 in cash and shares of New Charter equivalent to 0.5409 shares of Charter for each Time Warner Cable share outstanding.

The deal values Time Warner Cable at $78.7 billion.

Goldman Sachs Bank USA, Bank of America Merrill Lynch, Credit Suisse Securities (USA) LLC, UBS AG and Deutsche Bank Securities Inc. are the lead banks on the financing.

Regarding Bright House Networks, Charter will purchase the company from Advance/Newhouse Partnership for $10.4 billion.

Charter and Advance/Newhouse will form a new partnership under which New Charter will own between about 86% and 87% and Advance/Newhouse will own between about 13% and 14%, depending on Time Warner Cable shareholders’ cash election option.

The consideration to be paid to Advance/Newhouse by Charter will include $5.9 billion of exchangeable common partnership units, $2.5 billion of convertible preferred partnership units that will pay a 6% coupon and $2 billion of cash.

At close, pro forma debt would be nearly $62 billion, with leverage of 4.5 times 2015 estimated pro forma adjusted EBITDA. If the extra cash is elected in the Time Warner deal, debt would be about $66 billion and leverage would be around 4.8 times.

Closing on the Time Warner and Bright House acquisitions are expected to occur at the same time by the end of this year, subject to approval by both Charter and Time Warner Cable shareholders, regulatory review and other customary conditions.

The combination of Stamford, Conn.-based Charter with Time Warner Cable and Bright House will create a broadband services and technology company with 23.9 million customers in 41 states.

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