Moody's Downgrades Cablevision On Concerns About Its High Leverage

Moody's Investors Service downgraded Cablevision Systems Corp.'s corporate family rating by two notches Thursday, sending it further into speculative, or junk, status. The rating agency said the move reflected concerns about its high leverage and the aggressive financial policies of Altice N.V., which has recently won approval to acquire Cablevision. "Pro forma for the transaction and excluding any proposed synergies, Cablevision's leverage will be approximately 8x (debt-to-EBITDA, Moody's adjusted), which is very high relative to the B1 rating and amplifies risk for a company in a capital intensive, competitive industry," Moody's wrote in a note. Management is targeting $450 million of annual run-rate cost savings, which Moody's is expecting will be generated in 18 to 24 months. However, if those cuts are conducted too quickly, they could disrupt service quality and lead to market share losses. Offsetting those factors, are the company's strong market position and network assets. The outlook on the rating is stable, meaning Moody's does not expect to change it in the near term. Shares were flat Thursday, but are up 9% in the year so far, while the S&P 500 has gained 1.7%.