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Cable Operators

Mediacom Buying Back Pricey Senior Notes

6/23/2006 8:00 PM Eastern

Mediacom Communications Corp. said late last Monday that it will redeem $400 million of its 11% Senior Notes due 2013 on July 17. The redemption price will be 105.5% of the principal amount plus accrued and unpaid interest.

According to Mediacom, the bonds were some of its priciest and the company has been looking to buy in the debt.

Group vice president corporate finance and treasurer Matt Derdeyn said July 15 was the first call date on the bonds — the first period the company could force the redemption — and that if that call was not carried out, Mediacom would have to wait five years to exercise it again.

The move will allow the cable provider to remove some high-interest debt from the balance sheet and replace it with a lower-cost obligation.

Derdeyn said Mediacom has several options to pay for the bonds — it could use a portion of its $1 billion in available bank lines or use other sources.

“We can easily do that [pay for the redemption] with our available draw,” he said.

Pali Research analyst Richard Greenfield called the move a smart one. “They’re taking out very expensive debt and being able to refinance it with bank lines and eventually term it out at far more attractive rates than they were paying,” Greenfield said.

UBS cable debt and equity analyst Aryeh Bourkoff also praised the deal, adding that the bonds were costly for Mediacom — the operator was paying 11% interest on that debt compared to its next priciest notes which accrue 9.5% interest annually.

“This makes sense given the high coupon and will likely be accomplished through a new debt issue [bank or bonds] at better rates,” Bourkoff said.

September