Suddenlink Taking Bids

10/05/2007 8:00 PM Eastern

Suddenlink Communications, the St. Louis-based small-market cable operator headed by industry veteran Jerry Kent, is in the early stages of an auction to shed about 150,000 subscribers in Texas and Oklahoma, including some that were formerly part of Classic Communications, according to industry executives and published reports.

Focus On:
Recent Suddenlink sales
System Subscribers Buyer Price
SOURCE: Suddenlink and published reports.
Virginia17,000Jet BroadbandN/A
Bakersfield, Calif.40,000 RGUsBright House NetworksN/A

Suddenlink, which has about 1.4 million customers in eight states, has also apparently hired Denver cable investment banker RBC Daniels to manage the auction, according to financial publication The Daily Deal.

“We’re involved in the process of looking at the divestiture of a series of systems that are not proximate to our primary areas of operation,” Suddenlink vice president of corporate communications, community and government relations Peter Abel said. He declined to provide additional details.

Suddenlink, formerly Cebridge Connections, has managed the Classic systems since 2003. The Classic deal was one of the first for Cebridge, which agreed to manage the Tyler, Texas-based operator after it emerged from Chapter 11 bankruptcy protection. Soon after taking on management responsibilities for the systems — Classic is owned by Oak Tree Capital Management, also a backer of Cebridge — the St. Louis-based company shut down some of Classic’s smaller operations and upgraded those markets that warranted it.

Last year, Cebridge made two big acquisitions — 940,000 subscribers from Cox Communications for $2.55 billion and 240,000 customers in Charleston, W. Va. and surrounding communities from Charter Communications for $770 million. Shortly after those two deals were announced, Cebridge, which had by then changed its name to Suddenlink, said it would likely rationalize its footprint in the near future, selling or shutting down smaller systems with a cumulative subscriber base of about 200,000 customers.

While Suddenlink has shed some small systems recently — it sold about 17,000 subscribers in Bakersfield, Calif., to Bright House Networks and about 40,000 revenue-generating units in Virginia to Jet Broadband earlier this year — the latest deal would represent the biggest chunk of that planned footprint rationalization.

According to cable executives in the financial community with knowledge of the auction, books on the Suddenlink systems are expected to be released in late October or early November.

Those executives said that Suddenlink is hoping to sell the systems in one large block and that smaller operators and private-equity groups could be possible bidders.

While the Suddenlink deal approaches the auction gate, one Kansas City-area overbuilder is moving swiftly through its own process.

Everest Connections, an overbuilder based in Lenexa, Kan., was expected to begin poring over first round bids for its 40,000 customers last week.

Books on the properties, an overbuild of Time Warner Cable in Kansas City, went out earlier last month, according to an executive in the cable financial community with knowledge of the deal. New York-based cable investment banker Waller Capital is representing Everest, the cable executive said.

Everest is owned by Seaport Capital, a private-equity fund in New York that completed its purchase of the company from Kansas City-based utility company Aquila in July 2006 for about $86 million.

Potential bidders for Everest include other overbuilders like WideOpenWest and Knology Holdings, as well as smaller independent operators such as Broadstripe, formerly Millennium Digital Media.

According to the executive in the cable financial community, Everest generates about $20 million in annual cash flow. Based on past overbuild deals that were valued at a multiple of 8.5 times cash flow, Everest could attract prices in the $170 million range.

According to those executives, the Everest properties have been fully upgraded to 860-Megahertz capacity and have high-speed Internet and telephone service.

Seaport Capital did not return a call for comment.

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