Research Update: Cable One Inc. Outlook Revised To Stable From Positive On More Aggressive Financial Policy, 'BB' ICR Affirmed

U.S. cable service provider Cable One Inc. plans to acquire Hargray Communications Co. in a transaction with an total implied enterprise value of $2.2 billion. The company will fund the acquisition with a combination of $800 million in senior convertible notes, cash on hand, and rolled equity, which will cause its pro forma debt to EBITDA to rise to about 4.5x from 2.4x as of fiscal year-end 2020. We believe that the transaction reflects a more aggressive financial policy for the company, including a willingness to increase its leverage to the mid-4x to fund mergers and acquisitions (M&A), which compares with our previous expectation that it would sustain leverage of less than 4x. Still, we recognize that the business and

...- U.S. cable service provider Cable One Inc. plans to acquire Hargray Communications Co. in a transaction with an total implied enterprise value of $2.2 billion. The company will fund the acquisition with a combination of $800 million in senior convertible notes, cash on hand, and rolled equity, which will cause its pro forma debt to EBITDA to rise to about 4.5x from 2.4x as of fiscal year-end 2020. - We believe that the transaction reflects a more aggressive financial policy for the company, including a willingness to increase its leverage to the mid-4x to fund mergers and acquisitions (M&A), which compares with our previous expectation that it would sustain leverage of less than 4x. Still, we recognize that the business and overall industry have materially improved given the increasing importance of high-speed data (HSD) amid the coronavirus pandemic, which led us to loosen our downgrade trigger for the current rating to 4.75x. - Therefore, we are revising our outlook on Cable One to...

Research Update