Cequel Communications Sets Rate on $2.7 Billion in Loans

Cequel Communications LLC, the cable-television and Internet-services provider that does business as Suddenlink Communications, set the interest rate on $2.7 billion in loans it’s seeking to refinance borrowings, according to a person with knowledge of the transaction.

The new debt includes a $2.2 billion term loan B and a $500 million revolving line of credit, the company said today in a statement.

The term loan is due in seven years and will pay 3.25 percentage points more than the London interbank offered rate, with a 1 percent minimum on the benchmark, said the person, who declined to be identified because the terms are private. The five-year credit line will pay 2.5 percentage points more than Libor, according to the person.

Cequel, based in St. Louis, is proposing to sell the term loan at 99 cents on the dollar, the person said, reducing proceeds for the borrower and boosting the yield for investors.

Credit Suisse AG, Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co., Bank of America Corp. and Royal Bank of Canada are arranging the financing and will meet with lenders tomorrow, according to the person.

Proceeds will be used to refinance $2.53 billion in loans and to pay a $370 million dividend to parent company Cequel Communications Holdings I LLC in March and as much as $70 million more in May, according to the statement. As part of the agreement, Cequel won’t make any further payouts before April 1, 2013.

Mary Meduski, chief financial officer, declined to comment beyond the statement.

Ratings Affirmed

Moody’s Investors Service today assigned a Ba2 rating to Cequel’s proposed debt, two levels below investment grade.

The ratings company affirmed Cequel’s B1 corporate credit rating and stable outlook, citing an “adequate or better liquidity profile” and expectation that “leverage will decline to the mid-5 times debt-to-earnings before interest, taxes, depreciation and amortization range driven by Ebitda growth over the next 12 to 18 months.”

Cequel has a $2.33 billion term loan due in November 2013 and a $200 million revolving line of credit maturing in May 2013, according to data compiled by Bloomberg.

A term loan B is sold mainly to non-bank lenders such as collateralized loan obligations, bank loan mutual funds and hedge funds. In a revolving credit facility, money can be borrowed again once it’s repaid; in a term loan, it can’t.

To contact the reporter on this story: Krista Giovacco in New York at kgiovacco1@bloomberg.net.

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net.

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