S&P keeps Cablevision on watch

Standard & Poor's said Cablevision Systems Corp. remains on CreditWatch negative including CSC Holdings Inc.'s senior unsecured debt at BB-, senior subordinated debt at B+ and preferred stock at B, Rainbow Media Holdings Inc.'s senior secured bank loan at BB+ and AMC Co./IFC LLC/ WE, LLC's senior secured bank loan at BBB-.

S&P noted that on Aug. 5 Cablevision disclosed that it had been notified by its independent auditor, KPMG, that it could not complete its review of Cablevision's consolidated second-quarter 2003 financial statements due to the pending status of law firm Wilmer Cutler & Pickering's investigation.

This investigation is being conducted at the request of Cablevision's audit committee and is related to irregularities discovered by the company earlier in 2003. The failure of the company to obtain a completed review of its financial statements could result in the SEC taking the position that the company's 10Q filing is deficient because the interim financial statements have not been reviewed by an independent public accountant as required by SEC regulations.

Indentures and bank credit agreement provisions require Cablevision to deliver financial statements and other information filed with the SEC to the trustee and respective banks, S&P added. The indentures require delivery of this information within 30 days of filing with the SEC, while the bank agreements require deliver of quarterly financial statements within 60 days of the end of the quarter for the CSC Holdings facility, 65 days for the AMC/IFC/WE facility, and 75 days for the Rainbow Media Holdings facility.

Cablevision indicated in its second-quarter 10Q filing that it does not believe it is likely that the delay in obtaining KPMG's SAS 100 review of the company's second-quarter financial statements will have an adverse effect on its bank credit agreements and the indentures governing its debt obligations. However, S&P said it cannot determine whether a deficiency determination by the SEC would cause Cablevision to be out of compliance with requirements under its debt indentures and/or bank agreements.

Therefore, S&P said it will continue to monitor events to determine if the recent developments or future activities could trigger a default under either the indentures or the bank loan covenants.

S&P confirms Cummins, off watch

Standard & Poor's confirmed Cummins Inc. and removed it from CreditWatch negative including its notes, debentures and bank loan at BB+ and convertible trust preferreds at B+. The outlook is negative.

S&P said the confirmation reflects its view that although unfunded retiree obligations are of a concern, the cash funding requirements appear to be manageable relative to the company's cash flow generation, assuming several of the company's key end-markets continue to strengthen.

The negative outlook reflects concerns about Cummins increased exposure to unfunded pension obligations, which increased by $250 million to nearly $650 million at the end of December 2002 from $390 million in December 2001, S&P said.

The rating agency added that it is expecting that Cummins' unfunded pension obligations will not materially increase from current levels. Even considering the improving equity markets, which should cause a rebound in pension portfolio performance, Cummins is going to have to make relatively large cash contributions (about $100 million in both 2003 and 2004) in the near-term to significantly reduce this exposure. In addition, Cummins had unfunded other postretirement employee obligations (OPEB) of approximately $645 million at the end of 2002, bringing the company's total pension and OPEB liability to just over $1.2 billion at year-end 2002. This was an increase of about 18% from 2001 levels of about $1 billion.

Cummins' ratings reflect its solid business positions within highly competitive and cyclical markets, combined with a somewhat aggressive financial profile.

Cummins continues to focus on improving its cost structure by reducing excess overhead, consolidating facilities and improving its global sourcing of components.

S&P said it expects Cummins to continue improving earnings and cash flow generation and to use free cash flow for debt repayment. For the current rating Cummins debt capacity is very limited. S&P expects total debt (adjusting for the present value of operating leases) to EBITDA will improve to the 3x-3.5x range in the intermediate term and that funds from operations to total debt will return to the 20%-25% area. As of June 30, 2003, total debt to EBITDA was around 5x, and funds from operations (FFO) to total debt was around 19%.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.