Charter Communications plans to offer US$1.5bn of senior unsecured notes due 2024 to refinance existing debt and/or help fund its acquisition of Time Warner Cable. The news comes as the US cableco reports a US$122m loss for Q4 2015, however analysts are upbeat about its future.
Charter Communications (NASDAQ:CHTR) plans to offer US$1.5bn of senior unsecured notes due 2024 to refinance existing debt and/or help fund its acquisition of Time Warner Cable (NYSE:TWC).
The US cableco said in a statement that it initially intends to hold the proceeds as cash and cash equivalents and pay down revolver borrowings. They will then be used to repurchase or redeem certain outstanding 7% senior notes due 2019 and 7.35% senior notes due 2020, and/or for general corporate purposes. The latter alternative could involve funding a portion of the incremental cash proceeds to TWC stockholders if they decide to elect to receive US$115 per share in cash rather than US$100 per share.
The offering is subject to market conditions.
Charter today reported a net loss for Q4 2015 of US$122m, more than double the US$48m loss it reported a year earlier. The company said the 2015 result was driven by US$231m of interest expenses related to the financing of it takeovers of TWC and Bright House.
Revenues for the quarter were up 6.4% year-on-year to US$2.5bn, while adjusted EBITDA grew 7.5% year-on-year to US$908m.
Charter said its customer relationships grew by 82,000 in Q4, and FY 2015 marked the first year in over a decade that it had grown its video customer numbers. It claimed to serve 6.7 million residential and small and medium business customers as of 31 December 2015.
MoffettNathanson Research analyst Craig Moffett described Charter’s results as “solid” and broadly in line with an accelerating cable sector. “Cable’s infrastructure advantage is showing industry-wide and Charter’s advantage, at least on a standalone basis, is greater than any of the majors, with less competing fibre in their footprint than anyone else. That will normalise towards industry averages as TWC is integrated, but with Charter’s new IP-based interface in video still to come, that infrastructure advantage should nevertheless continue to expand.
New Street Research analysts were also upbeat about the results, saying “as we close in on [merger] deal close, we think attention should shift back to fundamentals”.
“Charter and TWC are well set up and remain our top picks in the US,” they said.
John Malone-backed Charter agreed to buy TWC and Bright House for US$56bn and US$10.4bn respectively in late May. If approved by regulators, the deal would create the country’s second largest cableco behind Comcast.