DBRS Maintains Cablevision’s and CSC Holdings Ratings Under Review, Negative

DBRS has today maintained Cablevision Systems Corporation and its wholly owned subsidiary, CSC Holdings, Inc. (CSC Holdings), rated B (low) and BB (low)/B (high), respectively, Under Review with Negative Implications. This follows the filing by the Company of a final definitive proxy on September 13, 2007 that finalized its shareholder vote – scheduled for October 24, 2007. However, DBRS believes that given the recent turmoil in the debt markets and the resulting impact on the cost of financing, the current transaction that has been contemplated by the Dolan family could be subject to change.

DBRS originally placed the ratings of Cablevision and CSC Holdings Under Review with Negative Implications on May 2, 2007 following the Company’s announcement that the Dolan family had issued an offer to privatize the Company in a leveraged cash offer to shareholders of $32.26 per share, valuing the public float and options at roughly $8.5 billion. The transaction contemplates refinancing the Company’s existing bank debt while leaving the majority of its notes and debentures outstanding.

DBRS notes that should the current transaction proceed as it is currently contemplated, debt levels on a consolidated basis are expected to increase significantly from roughly $11.5 billion currently to more than $20 billion, with gross debt to EBITDA increasing from 6.28 times at June 30, 2007 to roughly 9.5 times F2007 EBITDA. Furthermore, leverage at the Company’s cable operations is expected to increase from just over 5.0 times gross debt to EBITDA to over 9.0 times Cable’s F2007 EBITDA. DBRS expects that, given future EBITDA growth and lower capex levels, that Cablevision as a whole could turn free cash flow positive within two years following the privatization. However, DBRS believes that this leverage and financial risk profile would not be consistent with its current BB (low) rating.
To complete its review, DBRS will focus on a number of factors including: (1) leverage and the prospect of free cash flow both as a whole and at CSC Holdings; (2) the security package of the secured bank debt and its prospects for recovery; (3) structural subordination and (4) the outlook of the Company’s business risk profile as its organic growth rates slow with high penetration of growth services and as the competitive environment intensifies.

DBRS could potentially be in a position to indicate a range for its expected ratings on CSC Holdings, Intermediate Holdco and Super Holdco following the shareholder vote. However, this may be dependent on the final structure and possible post-closing deleveraging initiatives that the Dolans may commit to. At this stage DBRS cannot quantify the impact of any such changes. DBRS expects to finalize its ratings once the transaction has closed.

Note:
All figures are in U.S. dollars unless otherwise noted.