Charter conserves $40 million annual interest costs via refinancings

By Devika Patel

Knoxville, Tenn., Feb. 16 – Charter Communications, Inc. saved over $40 million in annual interest expense by refinancing its term loans, revolver and 6 5/8% senior notes due 2022.

“In December, we refinanced our term loans A, H, I and our revolver and in January we refinanced our term loans E and F,” chief financial officer Christopher L. Winfrey said on the company’s first quarter earnings conference call on Thursday.

“Those refinancings reduced the Libor spreads on each of these tranches and removed all remaining Libor floors from our bank debt.

“In February, we also issued a 10-year 5 1/8% note primarily to call the $750 million CCO [Holdings, LLC and CCO Holdings Capital Corp.] 6 5/8% callable notes due 2022.

“In aggregate, these cumulative refinancings should save us over $40 million in interest costs per year,” Winfrey said.

Fourth quarter adjusted EBITDA of $3.9 billion grew by 12.7% year-over-year on a pro forma basis, reflecting revenue growth and operating expense growth of 7.2% and 4.2%, respectively.

Excluding transition costs of $78 million in the fourth quarter of 2016 and $22 million in the prior year period, pro forma adjusted EBITDA grew by 14.3% year-over-year.

On an actual basis, adjusted EBITDA grew by 324.3% year-over-year, due to the company’s transactions with Time Warner Cable Inc. and Charter Communications, Inc., Legacy Charter and Bright House Networks, LLC.

The company finished the year with $60 billion of debt principal amount outstanding. Cash interest expense was $3.3 billion.

Total net debt to adjusted EBITDA was 4x. The company’s long term target leverage remains at 4x to 4.5x and Winfrey said that Charter would continue to target that range.

Free cash flow for the fourth quarter of 2016 totaled $1.9 billion, compared to $80 million during the same period last year.

Loans

On Dec. 9, the company launched a repricing and extension of its $995 million term loan H and $2,786,000,000 term loan I.

Bank of America Merrill Lynch was the lead bank on the deal.

The term loan H was repriced at Libor plus 200 basis points with no Libor floor from Libor plus 250 bps with a 0.75% Libor. The price was 99.875.

The maturity was extended to January 2022 from August 2021.

Meanwhile, the term loan I repricing took the rate to Libor plus 225 bps with no Libor floor from Libor plus 275 bps with a 0.75% Libor floor. The price was also 99.875.

The term loan I maturity was extended by one year to January 2024.

Charter also replaced its revolver and term loan A with new revolving loans bearing interest at Libor plus 175 basis points, reduced from Libor 200 bps and a new term A-1 loan bearing interest at Libor plus 175 bps, reduced from Libor plus 200 bps.

On Jan. 9, the company launched a repricing of its $1,448,000,000 term loan E due 2020 and $1,158,000,000 term loan F due 2021.

Bank of America Merrill Lynch was the left lead bank on the deal.

The term loans were repriced at Libor plus 200 basis points with no Libor floor at par.

The repricing will take the term loans down from Libor plus 225 bps with a 0.75% Libor floor.

Notes

On Jan. 17, Charter priced a $1 billion issue of senior notes due May 1, 2027 (B1/BB+/BB+) at par to yield 5 1/8%.

BofA Merrill Lynch was the left bookrunner. Citigroup Global Markets Inc., Wells Fargo Securities LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., UBS Investment Bank and Goldman Sachs & Co. were the joint bookrunners.

The Stanford, Conn.-based cable and internet services provider plans to use the proceeds to refinancing its 6 5/8% senior notes due 2022 and for general corporate purposes.

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