Moody's Downgrades Cablevision Systems (CVC) Two Notches to 'B1'

Moody's Investors Services ("Moody's") has downgraded the Corporate Family Rating ("CFR") of Cablevision Systems Corporation (NYSE: CVC) two notches to B1 from Ba2 following final regulatory approval for the acquisition of a majority equity interest in Cablevision by an affiliate of Altice N.V. ("Altice"). The transaction was approved by the NY State Public Utility Commission (PUC) on June 15, following approvals in May from the US Federal Communications Commission, US Department of Justice and New Jersey Public Utilities Commission. This rating action concludes the review for downgrade initiated on September 17, 2015.

The transaction to acquire Cablevision was announced on September 17, 2015 and valued Cablevision at $17.7 billion, or approximately 9x EBITDA. Moody's has downgraded CSC Holdings, LLC's ("CSC Holdings", a subsidiary of Cablevision) secured credit facility rating one notch to Ba1, unsecured rating three notches to B2, and the unsecured rating at Cablevision Systems Corporation two notches to B3.

In September of 2015, Altice issued approximately $8.6 billion of new debt through a financing escrow entity called Neptune Finco Corporation ("Neptune"). Neptune issued $4.8 billion of senior secured debt and $3.8 billion of unsecured debt which Moody's rated Ba1 and B2 respectively. At close the two classes of Neptune debt will be merged with and into CSC Holdings and rank pari passu with the similarly rated existing debt of CSC Holdings. Also at close, Neptune's B1 CFR and B1-PD PDR will be withdrawn.

Cablevision's speculative-grade liquidity ("SGL") rating is affirmed at SGL-2 reflecting its good liquidity. The outlook is stable.

A summary of today's actions follow:

Downgrades:

..Issuer: Cablevision Systems Corporation

.... Corporate Family Rating, Downgraded to B1 from Ba2

.... Probability of Default Rating, Downgraded to B1-PD from Ba2-PD

.... Senior Unsecured Regular Bond/Debenture, Downgraded to B3 (LGD6) from B1 (LGD5)

Affirmations:

..Issuer: Cablevision Systems Corporation

.... Speculative Grade Liquidity Rating, Affirmed SGL-2

Outlook Actions:

..Issuer: Cablevision Systems Corporation

....Outlook, Changed To Stable From Rating Under Review

..Issuer: CSC Holdings, LLC

Downgrades:

....Senior Secured Bank Credit Facilities, Downgraded to Ba1 (LGD2) from Baa3 (LGD2) (Ratings to be withdrawn)

....Senior Unsecured Regular Bond/Debenture, Downgraded to B2 (LGD4) from Ba2 (LGD4)

Outlook Actions:

..Issuer: CSC Holdings, LLC

....Outlook, Changed To Stable From Rating Under Review

Affirmations:

..Issuer: Neptune Finco Corp.

....Senior Secured Bank Credit Facilities, Affirmed Ba1 (LGD2)

....Senior Unsecured Gtd. Regular Bond/Debenture, Affirmed Ba1 (LGD2)

....Senior Unsecured Regular Bond/Debenture, Affirmed B2 (LGD4)

Ratings to be Withdrawn

.... Probability of Default Rating, B1-PD

.... Corporate Family Rating, B1

Outlook Actions:

..Issuer: Neptune Finco Corp.

....Outlook, Remains Stable

RATINGS RATIONALE

Cablevision's B1 CFR reflects its high leverage, parent company's aggressive financial policy, and significant business risk inherent in Altice's cost cutting strategy. Pro forma for the transaction and excluding any proposed synergies, Cablevision's leverage will be approximately 8x (debt-to-EBITDA, Moody's adjusted), which is very high relative to the B1 rating and amplifies risk for a company in a capital intensive, competitive industry. Management has proposed $450 million of annual run-rate cost savings, which Moody's expects to occur over an 18-24 month timeline. Pro forma for these savings, leverage would be in the mid 6x (Moody's adjusted) range. We believe that Altice will quickly reduce costs and realize meaningful savings which will result in falling leverage. However, if the cost cuts drive too fast a pace of organizational change and headcount reduction, this could result in disruptions to Cablevision's service quality and lead to market share erosion. This business risk, combined with the elevated financial risk from the debt raised to fund the transaction are reflected in the B1 corporate family rating.

Offsetting these limiting factors are Cablevision's strong market position with a quality base of network assets and favorable demographics within its footprint. Moody's expects leverage to fall to around 6x (Moody's adjusted) by the end of 2018 from around 8x (Moody's adjusted) at inception. Moody's projects free cash flow as a percentage of debt to remain in the low single digit range over this time frame, primarily as a result of the increasing interest expense offsetting a reduction in capital intensity and elimination of dividends. Cablevision competes head to head with Verizon's FiOS service in about half of its urban footprint. Moody's views FiOS as a competitive product offer and expects Verizon to gain market share if Cablevision stumbles operationally. However, Cablevision's industry leading market share reflects solid operating performance, despite weak overall industry video subscriber trends. Moody's expects broadband and small business segment results to remain strong and Cablevision to retain its current market share position.

The stable outlook is based upon Moody's expectation that leverage will decline towards 6x over the next 18-24 months. The outlook also reflects Moody's view that Cablevision will continue to generate positive free cash flow and maintain good liquidity. Moody's would consider an upgrade if leverage fell below 5x (Moody's adjusted) and free cash flow as a percentage of debt was above 5%, both on a sustained basis. Additionally, an upgrade would be dependent upon Cablevision maintaining or improving its market share and liquidity. Moody's would consider a downgrade if leverage is not on track to fall below 6x (Moody's adjusted) by year end 2018, liquidity were to become constrained, or market share materially erodes.

The principal methodology used in these ratings was Global Pay Television - Cable and Direct-to-Home Satellite Operators published in April 2013. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

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