Galaxy Turns a Corner


Galaxy Cablevision, the Sikeston, Mo.-based rural cable operator, said it will pay down about 20% of its subordinated debt in September, primarily because of the better-than-expected performance of its cable operations.

Galaxy, which emerged from Chapter 11 bankruptcy protection in March 2002, will pay about $8 million of its $40 million in subordinated debt on Sept. 1, CEO Ron Dorchester said.

Dorchester said the payments will be made from internal operations, as Galaxy now generates free cash flow.

As capital expenditures waned while Galaxy wound down its upgrades, he said, the company decided to retire debt.

“It’s gotten to the point where we can afford to do some additional things with it, other than just capex,” Dorchester said. “Up until now, we’ve been mostly spending it on upgrading cable-TV systems.”

Galaxy had toyed with the idea of putting all its systems on the block last year, encouraged by some of the robust prices other second-tier cable operations had attracted.

A few well-publicized deals last year — Charter Communications Inc.’s sale of Port Orchard, Wash., systems and RCN Corp.’s sale of Carmel, N.Y., properties — ranged between $3,600 and $4,000 per subscriber.

Charter sold another 235,000 subscribers in four states to Atlantic Broadband Inc. for about $3,250 apiece in a deal that closed earlier this year.

Dorchester said that while there has been some interest — Galaxy has sold about 10,000 subscribers in several small deals since last year — the company has decided to keep its core holdings in larger clusters while selling off non-strategic assets.

Galaxy has some relatively sizeable clusters in Mississippi (18,000 subscribers); Nebraska and Kansas (25,000 customers); and Florida (10,000 customers).

Dorchester said Galaxy has about three deals in the pipeline for about 7,000 subscribers, which should close soon. After those deals are completed, Galaxy will have about 63,000 customers.

“We closed some deals that were great deals we’ve been very happy with,” Dorchester said. “At the outset, we all believed that it would be unlikely if one offer [for all of Galaxy’s systems] would come along for a company doing business in our kind of communities in 13 states — it’s not a very good fit for too many people.

“But what’s happened is that we’re saying that we’ve got some great opportunities as long as we are willing to do multiple transactions, which we are, if the values are right. Along with that, the company has continued to do well. We’re probably doing better than we said we would a year ago. Paying down this sub debt early is an indication that the company is doing great.”

Galaxy has focused on reinvesting its cash flow to upgrade its systems. Dorchester said Galaxy has about 20 more headends to upgrade and then its rebuild plan will be complete. Those remaining systems are expected to be upgraded by the first half of next year.

He estimated that about 50,000 to 52,000 subscribers will be upgraded to capacities between 750 Megahertz and 860 MHz after the rebuild is finished.