S&P says Cablevision unchanged

Standard & Poor's said Cablevision Systems Corp.'s ratings are unchanged including its corporate credit rating at BB on CreditWatch negative after the company said its independent auditor KPMG is currently unable to complete its review of the company's second quarter financial statements.

The absence of this review may hamper the company's near-term ability to opportunistically refinance higher coupon debt and preferred stock as favorable market conditions emerge, S&P said.

Cablevision was placed on CreditWatch with negative implications on July 9 after it was announced that the SEC has begun a formal accounting investigation of the company, S&P noted. Therefore, while Cablevision's second quarter operating results showed healthy growth in operating cash flows largely due to the cable modem and digital programming service offerings, uncertainty still exists as to the impact that the SEC investigation will have on the company's credit profile.

S&P rates Sonic Automotive notes B+

Standard & Poor's assigned a B+ rating to Sonic Automotive Inc.'s proposed $200 million senior subordinated notes due 2013 and confirmed its existing ratings including its subordinated debt at B+. The outlook is stable.

S&P said Sonic's ratings reflect the company's below-average business profile as a consolidator in the highly competitive and cyclical U.S. automotive retailing industry, combined with high debt leverage and modest cash flow protection.

Sonic is one of the five largest firms in the U.S. automotive retailing industry. Numerous acquisitions have led to a larger and more diverse revenue base, S&P noted. Revenues for 2002 exceeded $7 billion, compared with $500 million in sales in 1997.

Sales of new vehicles are cyclical and generate very thin profit margins. About 40% of Sonic's revenue and 70% of gross profit come from the sale of higher-margin and more stable used vehicles, finance and insurance services, and repair parts and maintenance services.

Industry-wide new vehicle sales are expected to decline modestly during 2003 but remain at historically healthy levels, S&P said. Sonic should remain solidly profitable and generate positive free cash flow. The extent to which the company's financial performance could erode in a more severe cyclical downturn, however, is a major risk factor.

Sonic's financial profile is below average, reflecting its aggressive debt use and modest cash flow protection.

Future acquisitions, share repurchases and a recently initiated dividend program are expected to result in continued aggressive debt use. The company intends to balance its use of debt and equity in funding acquisitions to preserve financial flexibility. Over time, S&P Poor's expects EBITDA interest coverage to average 2.5x-3x and total debt to total capital to average about 75%, both appropriate levels for the rating.

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