Fitch Affirms Mediacom LLC & Mediacom Broadband's IDR at 'B+'; Outlook Stable

CHICAGO--(BUSINESS WIRE)--

Fitch Ratings has affirmed the 'B+' Issuer Default Rating (IDR) assigned to Mediacom LLC (LLC) and Mediacom Broadband LLC (Broadband). Both LLC and Broadband are wholly owned subsidiaries of Mediacom Communications Corporation (Mediacom). The Rating Outlook is Stable. As of Sept. 30, 2011, Mediacom had approximately $3.6 billion of debt outstanding including $1.6 billion at LLC and $2 billion at Broadband. A complete list of ratings being affirmed is provided at the end of this release.

Central to the affirmation of Mediacom's ratings is Fitch's ongoing expectation that the company will utilize free cash flow generation to reduce outstanding debt. Debt outstanding increased 6.4% relative to year-end 2010 to approximately $3.6 billion as of Sept. 30, 2011. The higher debt is within Fitch's expectations for the rating and is attributable to the funding requirements related to the privatization transaction completed in March 2011. The anticipated debt reduction coupled with modest operational improvement will strengthen credit protection metrics to a level more consistent with the current rating category with leverage trending below 6 times (x). Fitch estimates year-end 2011 leverage improved to 6x and 5.8x for LLC and Broadband respectively, and expects leverage will strengthen by year-end 2012 to 5.8x and 5.6x for LLC and Broadband respectively provided that each company uses its free cash flow to reduce outstanding debt.

Rating concerns center on the company's high leverage relative to its peer group and other larger cable multiple system operators (MSOs), a comparatively weaker subscriber clustering profile and service penetration rates that lag behind industry leaders, and Medicom's ability to maintain its competitive position relative to the threat posed by the direct broadcast satellite (DBS) operators. Fitch acknowledges potential growth and operating profile enhancements that can be captured by increasing service penetration levels as well as capitalizing on commercial revenue growth potential.

Additional concerns center on Mediacom's ability to grow retail revenues beyond the company's core 'triple-play' service offering. Fitch points out that event risks related to how Mediacom intends to use existing borrowing capacity on its revolvers and free cash flow generation are elevated within the company's overall credit profile.

Mediacom's liquidity position is sufficient given the current rating and is primarily supported by expected free cash flow generation and the aggregate available borrowing capacity from subsidiary revolving credit facilities, which totaled approximately $138 million when adjusted for recent capital market activity. LLC's revolver is scheduled to expire in December 2014 while Broadband's revolver will expire in December 2016 (subject to certain exceptions). The company also benefits from a favorable maturity schedule consisting of mandatory amortization from subsidiary credit facilities totaling $23 million during 2012 and 2013.

In aggregate, LLC and Broadband generated approximately $161 million of free cash flow (defined as cash from operations less capital expenditures and dividends) during the latest 12 months (LTM) period ended Sept. 30, 2011. Fitch believes the company's relatively stable operating profile, characterized by steady operating margins and consistent capital intensity levels, enable the company to produce consistent levels of free cash flow over the ratings horizon.

Positive rating actions would be contemplated if leverage declines below 5x, strengthens free cash flow generation, and the company demonstrates progress in closing gaps relative to its industry peers on service penetration rates and strategic bandwidth initiatives. Fitch believes that negative rating actions would likely coincide with a leveraging or shareholder-friendly transaction that increases leverage beyond 6.5x without a clear path to de-leverage, the adoption of a more aggressive financial strategy, or a perceived weakening of Mediacom's competitive position.

Fitch has affirmed the following ratings with a Stable Rating Outlook:

Mediacom Broadband LLC

--IDR at 'B+';

--Senior unsecured 'B/RR5'.

Mediacom LLC

--IDR at 'B+';

--Senior unsecured at 'B/RR5'.

Mediacom Illinois LLC

Mediacom Arizona LLC

Mediacom Indiana LLC

Mediacom California LLC

Mediacom Minnesota LLC

Mediacom Delaware LLC

Mediacom Wisconsin LLC

Mediacom Southeast LLC

Mediacom Iowa LLC

Zylstra Communications Corporation

--IDR at 'B+';

--Senior secured at 'BB+/RR1'.

MCC Georgia, LLC

MCC Illinois, LLC

MCC Iowa, LLC

MCC Missouri, LLC

--IDR at 'B+';

--Senior secured at 'BB+/RR1'.

The following rating has been withdrawn:

Mediacom Communications Corporation

--IDR 'B+'.

Additional information is available at 'www.fitchratings.com'. The issuer did not participate in the ratings process, or provide additional information, beyond the issuer's available public disclosure.

The ratings above were unsolicited and have been provided by Fitch as a service to investors.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 12, 2011);

--'Rating Global Telecoms Companies' (Sept. 16, 2010).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229

Rating Global Telecoms Companies - Sector Credit Factors

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=550205

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