A takeover of Time Warner Cable by Charter...
A takeover of Time Warner Cable by Charter Communications could lead to higher credit risk for TWC bondholders, said Moody’s Investment Service in a news release Tuesday. Numerous reports indicate such a takeover might be sparked by John Malone, CEO…
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of Liberty Media, which recently acquired a stake in Charter, Moody’s said. “Dr. Malone has never been known to be a passive investor, and his recent acquisition of a 27.3 percent stake in Charter Communications is unlikely to be his last move to drive further consolidation in the U.S. cable industry,” said Moody’s Senior Vice President Neil Begley. Begley said a Charter takeover of TWC would raise credit risks for bondholders because Malone “would likely want to limit his dilution and exert effective control in the transaction or series of transactions.” TWC’s status as a public company without a controlling shareholder means it doesn’t have much defense against shareholder pressure or a takeover, Begley said. “A poison pill would not thwart a reasonable offer to buy the company and would have to be considered by the board of directors, and in the absence of protective indentures bondholders are typically an afterthought in such situations.” Moody’s said TWC could defend itself from Charter by buying “mid-sized targets,” though this “likely would pressure its ratings given the higher leverage of the most likely targets.” Another defensive option would be for TWC to put in its own bid to buy Charter, said the release.