Fitch Ratings Ltd. said Tuesday that it has begun coverage of Charter Communications Inc. and its subsidiaries.
The ratings service issued “CCC+” ratings to Charter Communications’ convertible senior notes, Charter Communications Holdings LLC’s senior unsecured notes, CCH II LLC’s senior unsecured notes and CCO Holdings LLC’s senior unsecured notes.
Charter Communications Operating LLC’s senior secured bank facility and senior second lien notes received “B+” grades.
Fitch said its ratings “reflect Charter's highly levered balance sheet, poor operating performance relative to other large MSOs and Fitch's expectation that the company will continue to generate negative free cash flow during the near term.”
The company added that its ratings “incorporate the business risks and negative impacts on basic-subscriber-growth metrics, revenue and EBITDA [earnings before interest, taxes, debt and amortization] growth stemming from the competitive forces of the direct-broadcast satellite operators and management's attention to the company's balance sheet and liquidity position.”
However, the ratings service sees stability in Charter’s future.
“Management has taken several steps to streamline and improve its operating performance, including completing its cable-plant upgrades and consolidating customer-service centers and billing platforms,” Fitch said in a prepared statement.
“Fitch believes these actions -- coupled with the launch of advanced digital services and an improved focus on marketing, customer service and subscriber retention -- should improve the company's competitive position relative to the DBS operators and lead to stabilizing subscriber trends during 2004,” the company added.