Moody's downgrades San Juan Cable

Moody's Investors Service said it lowered San Juan Cable, LLC's corporate family and probability-of-default ratings to B3 from B2 following a reported $100 million dividend to the company's equity sponsor and consequent increase in the debt-to-EBITDA ratio to more than 9x.

The agency affirmed the senior secured first-lien term loan and revolving credit facility at B1 and senior secured second-lien term loan at Caa1, but changed the loss-given-default assessment on the first-lien loan and revolver to LGD2 (29%) from LGD3 (32%) and on the second-lien loan to LGD5 (75%) from LGD5 (86%) due to the increase in subordinated debt at the holding company.

The outlook is stable.

The corporate family rating considers San Juan's low fixed charge coverage and expectations that the company will remain cash flow neutral through 2007, Moody's said. San Juan has been challenged by negative economic factors in Puerto Rico, remains vulnerable to geographic concentration and lack of scale, and the agency is concerned by management's timing regarding the return of such a sizable amount of equity capital so soon after the initial acquisition (Fall 2005) given the execution risk regarding the rollout of high-speed data, advanced video services and telephony in the near term.

However, Moody's said it still believes the potential for cash flow growth, the attractive asset value of San Juan's upgraded network in a relatively less competitive market and primarily success-based capital expenditures should support the ratings.

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