Charter moves most debt out to 2019, is ‘committed’ to leverage range

By Devika Patel

Knoxville, Tenn., Oct. 26 – Charter Communications, Inc. issued $5 billion of notes in the third quarter, which drove 90% of the company’s debt maturities out to beyond 2019.

The company is “committed” to its target leverage target range of 4x to 4.5x, and management values Charter’s credibility within the debt markets.

“In July, we closed on $1.5 billion of investment-grade notes,” chief financial officer Christopher L. Winfrey said on the company’s third quarter earnings conference call on Thursday.

“In August, we closed on $1.5 billion of high-yield notes.

“In September, we closed on another $2 billion of investment-grade notes.

“Finally, earlier this month, we closed on another $1.5 billion of high-yield notes.

“The proceeds from these offerings have and will be used for general corporate purposes, including potential buybacks,” he said.

Winfrey said that the offerings have pushed most of the company’s debt maturities out to beyond 2019.

“Our weighted average cost of debt is now 5.4%, with a weighted average life of 11.5 years, with over 90% of our debt maturing after 2019,” he said.

At the end of the third quarter, net debt to adjusted EBITDA was 4.3x, in the middle of the company’s target range of 4x to 4.5x.

“We’re committed to the target leverage ratio of 4x to 4.5x,” Winfrey said.

“I think the credibility that we have from debt capital markets is equally important as what we have with the equity capital markets,” he said.

Third quarter adjusted EBITDA of $3.8 billion grew by 5% year over year.

Free cash flow for the third quarter of 2017 totaled $594 million, compared to $1 billion during the same period last year.

As of Sept. 30, total debt was $66.8 billion and Charter’s credit facilities provided about $2.9 billion of liquidity in addition to Charter’s $2.2 billion cash position.

On Aug. 3, CCO Holdings, LLC and CCO Holdings Capital Corp., both Charter subsidiaries, priced an upsized $1.5 billion issue of senior notes due Feb. 1, 2028 (B1/BB+/BB+) at par to yield 5%.

The issue size was increased from $1 billion.

The yield printed on top of yield talk. Initial guidance had the deal coming to yield 5% to 5 1/8%.

BofA Merrill Lynch was the left bookrunner. Citigroup Global Markets Inc., Wells Fargo Securities LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., UBS Investment Bank and Goldman Sachs & Co. were the joint bookrunners.

On Sept. 11, Charter subsidiaries Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. priced $2 billion of senior secured notes (Ba1/BBB-/BBB-) in a two-part offering.

The company sold $1.25 billion of new notes due March 15, 2028 at a spread of 210 basis points over Treasuries. The notes were talked to price in the 215 bps area.

The company also priced a $750 million add-on to its 5.375% senior secured notes due May 1, 2047 at a Treasuries plus 270 bps spread, on the tight side of spread guidance in the 275 bps area.

The company originally sold $1.25 billion of the 30-year notes at 99.968 to yield 5.377%, or a 235 bps spread to Treasuries, on March 30. The total outstanding now is $2 billion.

The active bookrunners were BofA Merrill Lynch and Citigroup Global Markets Inc. Passives were Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co., UBS Securities LLC and Wells Fargo Securities LLC.

On Oct. 10, Charter priced $1.5 billion of senior notes (B1/BB/BB+) in two tranches in a quick-to-market trade.

The deal included $500 million of new notes due March 1, 2023 that priced at par to yield 4%. The yield printed on top of yield talk in the 4% area.

The issuance also included a $1 billion add-on to the 5% notes due Feb. 1, 2028, which priced at 98.5 to yield 5.189%. The price came at the rich end of the 98 to 98.5 price talk.

BofA Merrill Lynch was the left bookrunner. Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, UBS Investment Bank, Wells Fargo Securities LLC and Goldman Sachs & Co. were the joint bookrunners.

Proceeds from all three sales were earmarked for general corporate purposes, including buybacks of the class A common stock of Charter or common units of Charter Communications Holdings, LLC.

Charter is a Stamford, Conn.-based broadband communications company and cable operator.

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