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Moody's ups Charter liquidity rating
Moody's Investors Service changed the speculative grade liquidity rating for Charter Communications Inc. to SGL-3 from SGL-4.
The rating change reflects the company's improved liquidity profile as projected over the forward 12 month period, pro forma for the reduction of current revolver borrowings using the net proceeds raised from the recent offering of $500 million in new senior unsecured notes (rated B3) by Charter's CCO Holdings LLC subsidiary.
The reduction in borrowings under the company's four subsidiary bank borrowing groups is expected to provide the company with sufficient liquidity and covenant cushion to fund its negative free cash flow deficit over the next four quarters.
While Moody's anticipates that the company will continue to generate a free cash flow deficit over the next 12 months, application of the net cash proceeds from the just completed $500 million offering of new senior debt to pay down revolver outstandings should facilitate covenanted access to about $1.2 billion under subsidiary bank revolving credit facilities (of the remaining $1.4 billion in undrawn committed lines of credit).
In consideration of the unchanged $135 million cash balance retained at the end of the third quarter, the company's total liquidity profile has clearly improved pro forma for this transaction, and combined, the company should be able to fund its liquidity needs through 2005.
Moody's said management expects that the company will remain in compliance with its financial maintenance covenants over the next 12 months, particularly in light of the reduction in net borrowings, although Moody's is somewhat more skeptical and notes that the still thin projected margin of compliance remains a constraining factor on the speculative grade liquidity rating.
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