Research Update: Cable One 'BB' Senior Unsecured Rating Placed On Watch Negative On Announcement Of Fidelity Communications Acquisition

U.S. cable service provider Cable One Inc. plans to acquire Fidelity Communications Co. for $525 million in an all-cash transaction. The company will fund the acquisition with a combination of cash on hand, revolver borrowings, and the proceeds from new debt, which will cause its pro forma debt-to-EBITDA metric to rise to about 3.3x from about 2.6x. We view the transaction as relatively credit neutral because we had already incorporated a cushion for additional leverage to fund mergers and acquisitions (M&A) in our 'BB' issuer credit rating on the company. However, we believe the recovery prospects for its unsecured creditors could be negatively affected by the incremental debt. Therefore, we are placing our 'BB' issue-level rating on Cable One's senior

...+ U.S. cable service provider Cable One Inc. plans to acquire Fidelity Communications Co. for $525 million in an all-cash transaction. The company will fund the acquisition with a combination of cash on hand, revolver borrowings, and the proceeds from new debt, which will cause its pro forma debt-to-EBITDA metric to rise to about 3.3x from about 2.6x. + We view the transaction as relatively credit neutral because we had already incorporated a cushion for additional leverage to fund mergers and acquisitions (M&A) in our '##' issuer credit rating on the company. + However, we believe the recovery prospects for its unsecured creditors could be negatively affected by the incremental debt. Therefore, we are placing our '##' issue-level rating on Cable One's senior unsecured debt on CreditWatch with negative implications. + We intend to resolve the CreditWatch placement in the coming months when more information about the company's funding mix becomes available....

Research Update