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FCC downplays debt, greenlights Cablevision sale to Altice

Claude Solnik //May 5, 2016 //

FCC downplays debt, greenlights Cablevision sale to Altice

Claude Solnik //May 5, 2016 //

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Despite critics’ contentions that increasing debt could lead to higher costs for local consumers, the Federal Communications Commission approved the acquisition as in the public interest.

The FCC on May 3 in its decision concluded “the transaction is unlikely to result in any significant public interest harms,” despite contentions by the Communications Workers of America that high debt could hobble the firm, potentially leading to lay-offs and cuts.

The agency, however, downplayed the impact of debt and determined “that the transaction is likely to result in some public interest benefits” of increased broadband speeds and more affordable options for low income consumers in Cablevision’s service.

Netherlands-based Altice, led by billionaire Patrick Drahi, and Cablevision still need approval from New York State for the $$17.7 billion deal to close.

“Although we find that the public interest benefits are limited, the scales tilt in favor of granting the applications because of the absence of harms,” the FCC wrote. “Accordingly, we grant the proposed transfers.”

Altice created a new subsidiary called Neptune Finco Corp. that issued $8.6 billion in debt on top of Cablevision’s $5.9 billion in debt, increasing the amount to $14.5 billion

After the deal was announced, Moody’s Investor Service placed Cablevision under review for downgrade,. while Standard & Poor’s Financial Services put the company on credit watch with negative implications.

Standard & Poor’s said the credit watch reflects “the potential for at least a one notch downgrade upon completion of the acquisition by Altice.”

The FCC said it recognizes concerns “that the transaction debt load is significant,” but cited Moody’s prediction of $450 million in savings two to three years after the transaction.

The Communications Workers of America pointed to that as likely to include layoffs, while Altice said the “majority of savings will have nothing to do with areas that bear on customer experience,” mostly from overhead, general and administrative expenses, procurement and special projects.

Cablevision serves 3.1 million subscribers, while Altice serves nearly 35 million subscribers worldwide. The FCC said “the transaction thus would help level the playing field” with larger competitors.

Altice and Cablevision said customers would benefit from Altice’s “global scale, access to capital and fresh perspective,” helping compete against rivals such as Verizon, AT&T/DirecTV and DISH.

Altice also would have access to a five-year, $2 billion revolving credit facility, giving it access to additional cash, but also potentially leading to more debt.

Cablevision and Altice on September 16, 2015 reached an agreement under which Altice would pay $34.90 in cash for each share of Cablevision Class A and Class B common stock.

Cablevision expects the deal to close in the second quarter of 2016, subject to customary regulatory approvals.