Cable One 'BB' Senior Unsecured Rating Placed On Watch Negative On Announcement Of Fidelity Communications Acquisition

  • U.S. cable service provider Cable One Inc. plans to acquire Fidelity Communications Co. for $525 million in an all-cash transaction. The company will fund the acquisition with a combination of cash on hand, revolver borrowings, and the proceeds from new debt, which will cause its pro forma debt-to-EBITDA metric to rise to about 3.3x from about 2.6x.
  • We view the transaction as relatively credit neutral because we had already incorporated a cushion for additional leverage to fund mergers and acquisitions (M&A) in our 'BB' issuer credit rating on the company.
  • However, we believe the recovery prospects for its unsecured creditors could be negatively affected by the incremental debt. Therefore, we are placing our 'BB' issue-level rating on Cable One's senior unsecured debt on CreditWatch with negative implications.
  • We intend to resolve the CreditWatch placement in the coming months when more information about the company's funding mix becomes available.
NEW YORK (S&P Global Ratings) April 2, 2019—S&P Global Ratings today took the 
rating actions listed above. The CreditWatch negative placement follows Cable 
One's recent announcement that it will acquire Sullivan, Mo.-based cable 
operator Fidelity Communications Co. for $525 million. We believe the all-cash 
transaction, which the company will fund with a combination of cash on hand, 
revolver borrowings, and the proceeds from new debt, could materially lower 
the recovery prospects for Cable One's unsecured creditors depending on the 
type and amount of debt it raises to finance the acquisition.

We intend to resolve the CreditWatch placement in the coming months as more 
information becomes available. The outcome will depend on the type and amount 
of debt that the company issues to finance the acquisition. Once more 
information becomes available about Cable One's funding mix, we will update 
our recovery analysis to incorporate the new outstanding secured and unsecured 
claims and our enterprise value to reflect the benefits of the acquisition.
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