OREANDA-NEWS. S&P Global Ratings today assigned its 'BB-' issue-level rating and '1' recovery rating to Bethpage, N. Y.-based CSC Holdings LLC's proposed $1.9 billion senior guaranteed notes maturing in April 2027. The '1' recovery rating indicates our expectation for very high (90%-100%) recovery for noteholders in the event of a payment default. The notes are unsecured obligations, but are guaranteed by restricted subsidiaries of CSC Holdings and will rank ahead of existing senior unsecured notes at the issuer.

We expect net proceeds from the note issuance to refinance the remaining balance on the company's $3.8 billion term loan B due in 2022, which the company will partially refinance with a new $1.9 billion term loan B due in 2024. The 'BB-' issue-level rating and '1' recovery rating on the new $1.9 billion term loan B are in line with the existing senior secured credit facility. The 'B' corporate credit rating and stable outlook are unchanged.

RECOVERY ANALYSIS

Key analytical factors

Our default scenario contemplates a default resulting from a revenue decline in its cable operations as a result of accelerated pricing pressure and competition, primarily from Verizon Communications Inc.'s FiOS triple-play service. Increased price-based competition in the company's existing markets, lower revenues per customer, and a reduced subscriber base would result in a decline in simulated EBITDA to a level below the minimum required to service CSC's fixed charges (principally interest expense, capital expenditures, and scheduled debt amortization).

Other default assumptions include an 85% draw on the revolving credit facility and an increase in borrowing costs because of increases in LIBOR and borrowing rates that are the result of credit deterioration and covenant violations through the year of default; all debt amounts include six months of prepetition interest.

We believe that if CSC defaulted, it would retain a viable business model, fueled by continued demand for cable TV, data, and voice services, in addition to the strong demographics of its service territory and well-clustered operations. Therefore, we believe that lenders would achieve the greatest recovery value through a reorganization of the borrower rather than through liquidation. We have valued the company at a 6x multiple of EBITDA. The 6x valuation multiple is on the lower end of the typical 6x-7x range we generally ascribe to incumbent cable operators given intense competition from Verizon FiOS.

Simulated default assumptionsSimulated year of default: 2019EBITDA at emergence: $1.5 billionEBITDA multiple: 6xSimplified waterfallNet enterprise value (after 7% in administrative costs): $8.45 billionPriority claims: $44 millionCollateral value available to secured creditors: $8.41 billionSecured first-lien claims: $3.61 billion--Recovery expectations: (90%-100%)Guaranteed bonds: $3 billion--Recovery expectations: (90%-100%)Value available to unsecured creditors: $1.8 billionUnsecured claims: $7.18 billion--Recovery expectations: (10%-30%; upper half of the range)Subordinated claims: $2.9 billion--Recovery expectations: 0%-10%