8-K: Altice USA Subsidiary Secures $1 Billion Receivables-Backed Loan Facility

Altice USA's indirect wholly-owned subsidiary, Cablevision Funding LLC, has entered into a new $1 billion receivables facility with Goldman Sachs and TPG Angelo Gordon, aimed at financing working capital, prepaying debt, and general corporate purposes.

Summary

• Cablevision Funding LLC, an indirect wholly-owned subsidiary of Altice USA, Inc., secured a $1 billion Receivables Facility Loan and Security Agreement.
• The initial term loans mature on January 16, 2031, and accrue interest at a fixed rate of 8.875% per annum.
• The loans were issued with an original issue discount of 400 basis points (4.00%).
• Monthly amortization is set at 2.000% per annum until January 16, 2028, increasing to 5.00% per annum thereafter or if incremental term loans exceed $50 million.
• Proceeds are designated for working capital, debt prepayment, general corporate purposes, funding an interest reserve account, and covering transaction costs.
• The obligations are secured by substantially all assets of the Borrower and Guarantors, including receivables and network assets in the Bronx and Brooklyn service areas.
• CSC Holdings, LLC, as the Sponsor, will retain a material net economic interest of at least 5% of the aggregate value of Receivables Assets to comply with EU/UK securitization regulations.

Sentiment

Score: 7

Explanation: The company successfully secured a substantial $1 billion receivables-backed loan, providing liquidity and enabling debt prepayment. The fixed interest rate offers stability, and the structure addresses international regulatory requirements. However, the 4% original issue discount and the fixed 8.875% interest rate represent a notable cost of capital, and the operational and financial covenants introduce performance-based risks.

Positives

• Secured $1 billion in new financing, providing significant capital for working capital and general corporate purposes.
• Allows for prepayment of existing indebtedness, potentially optimizing the company's debt structure.
• Fixed interest rate of 8.875% provides predictability in interest expenses for the initial term loans.
• The transaction is structured to comply with EU/UK securitization regulations through the Sponsor's risk retention.

Negatives

• The loan carries a fixed interest rate of 8.875%, which could be considered high depending on prevailing market rates.
• An original issue discount of 400 basis points (4.00%) means the company receives less than the face value of the loan upfront.
• Mandatory prepayment triggers based on operational metrics (Residential Data Churn, Video Churn, Residential Data Penetration) and financial covenants (DSCR, Consolidated Total Net Leverage Ratio) could force early repayment.
• Prepayment premiums apply, making early voluntary repayment costly, especially before July 16, 2028.

Risks

• Operational Performance Risks: Mandatory prepayments are triggered if Residential Data Churn exceeds 2.5%, Video Churn exceeds 3.0%, or Residential Data Penetration falls below 40.0%.
• Financial Covenant Risks: Failure to maintain a Debt Service Coverage Ratio of at least 2.35:1.00 or a Consolidated Total Net Leverage Ratio not exceeding 5.00:1.00 (for incremental loans) could lead to an Event of Default and mandatory prepayments.
• Manager Termination Event: A Manager Termination Event, as defined in the Management Agreement, could trigger mandatory prepayments.
• Legal/Regulatory Compliance: Failure to comply with separateness covenants (e.g., maintaining separate legal identity, books, bank accounts) could lead to an Event of Default.
• Collateral Perfection: Risks associated with maintaining perfected first-priority security interests in the collateral, subject to Permitted Liens.
• Interest Rate Fluctuations: While initial loans are fixed, future incremental loans or conversions could expose the company to variable interest rate risks.
• Litigation: Pending or threatened litigation in excess of $5,000,000 could have a Material Adverse Effect.
• Environmental Liabilities: Non-compliance with environmental laws or liabilities could have a Material Adverse Effect.
• Employee Benefit Plan Liabilities: ERISA events or issues with employee benefit plans could result in material liabilities.
• Tax Liabilities: Failure to pay taxes or unresolved tax disputes could have a Material Adverse Effect.
• Sanctions/Anti-Corruption: Non-compliance with sanctions or anti-corruption laws could lead to prohibitions or breaches.

Future Outlook

The proceeds from the Initial Term Loans are expected to be used to finance working capital, prepay indebtedness, and for other general corporate purposes, indicating a focus on operational liquidity and debt management. The company also plans to maintain public corporate credit ratings from S&P and Moodys for the Sponsor.

Management Comments

• The Borrower hereby designates the entity serving as the Administrative Agent to serve as Borrowers non-fiduciary agent solely for purposes of maintaining the Register.
• The Borrower hereby represents and warrants to the Agent and the Lenders as of the Borrowing Date that: 1. No Default or Event of Default has occurred and is continuing after giving effect to the Transactions and the representations and warranties made to the Agent or the Lenders by the Loan Parties contained in the Loan Agreement or in the other Transaction Documents are true and correct in all material respects... 2. There has been no Material Adverse Effect since December 31, 2024. 3. Immediately before and after giving effect to the Term Loan, (x) the DSCR[, calculated on a Pro Forma Basis,] is greater than or equal to [] to 1.00 and (y) the Consolidated Total Net Leverage Ratio[, calculated on a Pro Forma Basis,] is less than or equal to [] to 1.00.
• The Borrower, in its reasonable discretion, and within thirty (30) days of receipt of such Insurance Proceeds into the Insurance Proceeds Account, if any, may elect by a notice to the Manager and Administrative Agent not to restore or replace the Receivables Assets or other property of the Borrower and its Subsidiaries at the Network.
• The Borrower will use commercially reasonable efforts to cause the SR Retention Holder to comply with the provisions of the Risk Retention Letter.
• The Borrower shall take such action and provide such information... as reasonably requested by the Lenders... in order to address compliance by the Lenders with applicable EU/UK securitization regulations.
• The Loan Parties will not require any employees to conduct its business operations.

Industry Context

This transaction is a securitization of receivables, a common financing strategy for companies with predictable cash flows from customer contracts, such as broadband providers. The focus on 'fiber-optic and/or hybrid fiber-coaxial broadband networks' and 'receivables generated by the Company's Bronx and Brooklyn service area and network assets' indicates a strategy to leverage specific, geographically defined assets and their associated revenue streams. The mention of EU/UK securitization regulations and risk retention suggests a sophisticated financing structure designed to appeal to a broad base of institutional investors, potentially including those with specific regulatory requirements. The involvement of Goldman Sachs and TPG Angelo Gordon highlights the institutional nature of this debt.

Comparison to Industry Standards

• The fixed interest rate of 8.875% and the 400 basis point original issue discount should be compared to recent securitized debt offerings by other broadband or infrastructure companies, such as Lumen Technologies (formerly CenturyLink) or Frontier Communications, or other Altice USA subsidiaries, to assess competitiveness.
• The financial covenants, including a Debt Service Coverage Ratio (DSCR) of >= 3.73:1.00 and a Consolidated Total Net Leverage Ratio of <= 2.41:1.00 for the initial loan, should be assessed against typical leverage and coverage ratios for asset-backed or securitized debt in the telecom/broadband sector, which are generally tighter than corporate-level debt.
• Operational triggers for cash sweeps, such as Residential Data Churn exceeding 2.5%, Video Churn exceeding 3.0%, and Residential Data Penetration falling below 40.0%, are specific performance indicators for a broadband business. These should be benchmarked against industry averages or best-in-class performance for churn and penetration in comparable urban/suburban markets (e.g., Bronx and Brooklyn).
• The 5% risk retention by the Sponsor (CSC Holdings, LLC) is a standard requirement under EU/UK securitization regulations (e.g., Article 6(3)(d) of the EU Securitization Regulation), indicating compliance with international best practices for securitization.

Corporate Governance

Related Party Transactions

• The Loan and Security Agreement is between Cablevision Funding LLC (indirect wholly-owned subsidiary of Altice USA, Inc.) and lenders, with various other Altice USA subsidiaries (Cablevision SPE Guarantor LLC, NYC AssetCo, NYC OV SPE Guarantor, NYC OV AssetCo, Cablevision Systems New York City LLC) acting as Guarantors.
• CSC Holdings, LLC (Sponsor and direct parent of Holdings) acts as the Manager under a separate Management Agreement and is responsible for risk retention.
• Shared Infrastructure Services Agreement and Shared Infrastructure Management Agreement exist between Loan Parties, Manager, and InfraCos (Cablevision Shared Infrastructure LLC, NYC OV InfraCo LLC), which are also subsidiaries of the Sponsor but not Loan Parties or Guarantors.
• Irrevocable Payment Directions from the Sponsor to payment processors (JPMorgan Chase Bank, Paymentech, LLC, AMDOCS BCS, Inc.) are in place.
• Permitted Affiliate Transactions include the Guaranty, assignments of Receivables Assets to a Loan Party, and obligations explicitly required by the Management Agreement or other Closing Date Transaction Documents.
• Shared expenses with Related Parties are to be allocated fairly and reasonably.

Stakeholder Impact

• Shareholders (Altice USA): The new financing provides capital for strategic purposes and debt management, potentially improving the company's financial flexibility and stability. The securitization structure aims to isolate risk, which could be viewed positively.
• Lenders (Goldman Sachs, TPG Angelo Gordon): They receive a fixed-rate return on a $1 billion loan secured by specific receivables and network assets, with various covenants and triggers designed to protect their investment. The original issue discount and prepayment premiums provide additional yield.
• Customers (Bronx and Brooklyn service areas): The financing is tied to the network assets and receivables in these areas, implying continued investment and operation of services, which should benefit customers.
• Employees: No direct impact on employees is mentioned, as the Loan Parties are structured not to require employees, relying on the Manager (CSC Holdings, LLC) for operational services.
• Creditors (Existing Debt Holders): The transaction involves prepaying existing indebtedness, which could affect certain creditors. The Loan Parties are designated as Unrestricted Subsidiaries under existing debt documents, aiming to prevent negative impacts on existing debt covenants.

Next Steps

• Borrower to use loan proceeds for working capital, debt prepayment, general corporate purposes, and funding the interest reserve account.
• Manager to direct customers and payment processors to pay collections into Control Accounts, aiming for 95% Control Account Collections after 120 days from Closing Date.
• Loan Parties to establish Account Control Agreements for existing Deposit Accounts within 45 days after Closing Date.
• Loan Parties to file UCC-3 termination statements for prior liens on Collateral on the Closing Date.
• Loan Parties to execute and deliver mortgages for Material Real Property within 90 days (or 180 days for existing properties) after Closing Date.
• Borrower to furnish quarterly and annual financial statements, compliance certificates, and manager reports to the Administrative Agent and Lenders.
• Borrower to host conference calls or provide management discussions and analysis following quarterly financial statements.
• Borrower to notify Agents of Defaults, ERISA Events, litigation, and material notices related to Existing Debt Documents or Material Agreements.
• Loan Parties may contribute additional Receivables Assets, subject to lender consent and conditions.
• Loan Parties may incur Incremental Term Loans, subject to financial covenants and other conditions.
• The company may pursue a Public ABS Transaction to repay or exchange the Term Loans.

Key Dates

Recommendation

Keywords

Altice USA, Cablevision Funding LLC, Receivables Facility, Debt Financing, Term Loan, Goldman Sachs, TPG Angelo Gordon, SEC Filing, 8-K, Corporate Finance, Securitization, Risk Retention, Fixed Rate Debt, Original Issue Discount, Financial Covenants, Broadband Network, Cablevision, New York, Bronx, Brooklyn