Adelphia & Hyperion Rtgs Raised by S&P; Olympus' Afrmd.NEW YORK--(BUSINESS WIRE)-- Standard & Poor's CreditWire 9/2/98 -- Standard & Poor's today raised its corporate credit rating of cable TV operator Adelphia Communications Corp. to double-'B'-minus from single-'B'-plus. The senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. rating was raised to single-'B'-plus from single -'B' and the preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. rating was raised to single-'B' from single-'B'-minus. The upgrade follows the company's successful equity offering on Aug. 14, 1998, which raised approximately $250 million in proceeds. Proceeds are to be used to reduce the company's debt level, which is currently among the highest in the cable industry. In addition, a double-'B'-plus bank loan rating was assigned to the company's approximately $884 million of bank debt. The outlook on Adelphia is now stable. Standard & Poor's also raised the corporate credit rating of Hyperion Telecommunications, Inc. to double-'B'-minus from single-'B'-plus. The corporate credit rating of Hyperion is the same as that of Adelphia, reflecting the majority ownership by Adelphia, currently about a 66% interest. The senior debt rating for Hyperion was raised to single-'B'-plus from single-'B', and is currently one notch lower than Adelphia's corporate credit rating, reflecting the structural subordination to Adelphia's substantial secured bank debt. The preferred stock rating was raised to single-'B' from single-'B'-minus. Ratings for the competitive local exchange carrier (CLEC (Competitive Local Exchange Carrier) An organization offering local telephone service that is not one of the traditional telephone companies. The Telecommunications Act of 1996 allowed competition to the incumbent telcos (ILECs), enabling new companies (CLECs) ) Hyperion as a stand-alone credit would be considerably lower. The outlook on Hyperion is now stable. Additionally, the double-'B'-minus corporate credit rating and single-'B' senior unsecured debt rating of cable operator Olympus Communications L.P. were affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. . Olympus is a joint venture that is 50% owned and managed by Adelphia. Ratings on Olympus have been higher than those for Adelphia, reflecting a more conservative capital structure and the financial strength of the other 50% partner, a subsidiary of FPL FPL feline panleukopenia. Group Inc. (A+/Stable/--). Standard & Poor's expects to continue to rate Olympus independently from Adelphia, although some linkage is expected given the common management and the same core business of cable television. The outlook on Olympus remains positive. The upgrade reflects Adelphia's recent sale of equity, which somewhat improves the overall capital structure of the company and its operating units operating unit A type of operating company that engages in transactions with outsiders and that is owned by another business. For example, in 1995 the stockholders of Capital Cities/ABC approved a $19 billion merger with the Walt Disney Company, whereupon . While the company is still relatively leveraged on a consolidated basis, the sale of about $250 million in equity and subsequent reduction of debt suggests that the company is looking to reduce its dependence on debt. Adelphia continues to benefit from a strong cable operation, which includes a sizable siz·a·ble also size·a·ble adj. Of considerable size; fairly large. siz  a·ble·ness n. group of well clustered owned and managed cable
systems totaling about 1.8 million basic subscribers. The systems are
favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. located in the suburban areas of large and medium-sized markets, and face little competitive threat. In addition, several regions have difficulty receiving off-air television signals, which has resulted in Adelphia's 72% basic penetration rate, which is above the industry average. Adelphia also benefits from strong operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: that have consistently been above industry averages, at over 50%. However, Adelphia has traditionally relied heavily on debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay in order to expand or upgrade its systems. Also, debt used to fund the buildout The construction and implementation of a system. For example, "network buildout" implies constructing the network and going online. of telephone subsidiary Hyperion has been consolidated on Adelphia's balance sheet, which has resulted in weaker financial ratios while that segment moves toward positive cash flow. As a result, debt to cash flow for the consolidated entity has been among the highest in the cable industry, at or above 10 times (x). The addition of a significant amount of new equity into the company, combined with a recent equity offering at Hyperion, helps to reduce the reliance on debt funding. However, debt levels for the consolidated company are still expected to remain high for the rating, with pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma debt to cash flow still above 9.0x. Pro forma debt to cash flow at the cable operation is at a more moderate level of about 7.5x. The bank loan rating for Adelphia, two notches above the corporate credit rating, reflects the significant estimated value of the company's cable systems, as well as the flexibility to divest To deprive or take away. Divest is usually used in reference to the relinquishment of authority, power, property, or title. If, for example, an individual is disinherited, he or she is divested of the right to inherit money. cable system segments if needed. Standard & Poor's believes that the estimated value results in substantial protection afforded to senior secured holders, even in a distressed scenario. OUTLOOK (Adelphia and Hyperion): STABLE The stable outlook reflects Standard & Poor's view that spending on cable rebuilds and telephone expansion into new markets is likely to result in continuing high debt levels over the near term. However, the ability to further reduce debt, through asset sales or additional equity infusions, could improve leverage ratios sufficiently to warrant additional upgrade consideration if the deleveraging is viewed as permanent and significant in size. -- CreditWire
CONTACT: Scott Dinsdale, CFA, New York (1) 212-208-8933
Copyright 1998, Standard & Poor's Rating Services
|
|
||||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion