Charter and SpinCo plan new debt for purchase of Comcast customers

By Sara Rosenberg

New York, April 28 - Charter Communications plans on getting $7.7 billion of new debt and SpinCo, a newly formed cable company, will raise $8.5 billion of new debt to fund the acquisitions of customers and systems from Comcast Corp., according to an 8-K filed with the Securities and Exchange Commission on Monday.

BofA Merrill Lynch, Credit Suisse, Deutsche Bank Securities Inc. and Goldman Sachs are leading Charter's financing.

Pro forma for the transaction, Charter will have $21.8 billion of debt at close and leverage of about 5 times EBITDA.

Charter then plans to naturally delever back to its target leverage range of 4 times to 4.5 times EBITDA.

The acquisitions are conditioned on the completion of the merger of Comcast and Time Warner Cable, as well as receipt of Hart-Scott-Rodino, FCC and other required regulatory approvals, Charter shareholder approval, and various other matters.

Under the agreement, following the close of the Comcast-Time Warner Cable merger, Charter will buy systems serving about 1.4 million of the prior Time Warner Cable video customers for an estimated value of $7.4 billion based on projected 2014 EBITDA.

In addition, Charter will own about 33% of the new publicly-traded cable provider (SpinCo) to be spun off by Comcast serving about 2.5 million customers, and Comcast shareholders, including the former Time Warner Cable shareholders, will own about 67% of SpinCo.

Charter will acquire its interest in SpinCo by issuing stock to Comcast shareholders.

SpinCo will have about 5 times leverage at close, and based on the estimated 2014 carve-out EBITDA of SpinCo, an estimated enterprise value of $14.3 billion and an estimated equity value of $5.8 billion.

The filing went on to say that SpinCo will enter into term loans and a $750 million revolver to help finance the transaction.

Charter is a Stamford, Conn.-based broadband communications company and cable operator.

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