Fitch: Broad-Based Restructure Of Cablevision Unlikely After SEC Filing

Business Wire, August 30, 2006

CHICAGO -- Cablevision Systems Corporation's (CVC) disclosure through a regulatory filing with the Securities and Exchange Commission (SEC) that the company has not delivered financial information to the lenders under the credit agreement for its wholly owned subsidiary, CSC Holdings, Inc. (CSC), in accordance with the covenants contain within CSC's credit facility, does not currently appear to have an adverse effect on the ratings for both entities, which Fitch currently rates with a Negative Rating Outlook:

CVC

--Issuer Default Rating (IDR) 'B ';

--Senior unsecured 'CCC /RR6'.

CSC

--Issuer Default Rating (IDR) 'B ';

--Senior unsecured 'BB-/RR3';

--Senior Secured Bank Credit Facility 'BB/RR1'.

However, Fitch will place the ratings of CVC and CSC on Rating Watch Negative or possibly downgrade both entities if it appears unlikely (in the absence of any extension of the waiver of default) that the company will deliver all required financial information to the revolver and term A lenders within the cure period or if the required term B lenders or CVC or CSC bondholders provide CVC or CSC with a notice of default. In Fitch's view a broad based restructure of the company's capital structure is unlikely. However the deliverance of a notice of default by the term B lenders or the CSC or CVC bondholders could elevate the refinancing risk associated with the company's credit profile.

The company indicates that it has received from the term A loan and revolver lenders a waiver of any default related to the financial reporting covenant until Sept. 22, 2006. CVC would then have 30 days to cure the default. In the event CVC and CSC fail to deliver the required financial information by Oct. 25, 2006 and in the absence of any extension thereof, the term A loan and revolver lenders can exercise any remedy against CSC as provided in the credit agreement including accelerating the outstanding amounts under the term A loan and the revolver loan.

The failure to deliver financial information to the term B lenders under CSC's credit agreement and holders of CVC's and CSC's senior unsecured debt could become an event of default if 25% of the term B lenders or holders of any series of notes or debentures provide CVC or CSC, as the case may be, a notice of default, and the default is not cured within sixty days. The financial information was to be delivered to the term B lenders on August 29 and to the CVC and CSC bondholders on September 8, 2006. CVC has not received such a notice of default from the term B lenders or holders of CVC or CSC notes or debentures.

Fitch's ratings and Negative Rating Outlook reflect ongoing concern related to the company's financial policy and the potential for the company to continue to place greater priority on returning capital to shareholders at the expense of bond holders as well as the ongoing possibility that company management will use distributions from the restricted group to fund other investments. Factors that would contribute to an Outlook revision to Stable for CSC include an evaluation of the company's commitment to improving and maintaining a stable credit profile as well as the continuation of the company's positive subscriber and operational trends.

Fitch's ratings also incorporate the increasing business risk stemming from the persistent competition for subscribers from the DBS operators as well as Fitch's expectation that Verizon's entry into video services will heighten the competitive pressures within CSC's markets.

While Fitch believes CSC's triple play service offering strengthens the company's competitive position, Fitch expects that the increased competition can potentially lead to operating margin pressure driven by increased subscriber churn, and elevated subscriber acquisition and retention spending. However Fitch believes that the company has a strong competitive position to address the increased competition as CSC continues to gain operating scale within its cable telephony and advanced digital video products. Fitch expects that the continued diversification of the company's revenue generating units will increase ARPU and drive EBITDA growth during 2006. In Fitch's opinion free cash flow generation from the cable operations during 2006 will be further pressured by increasing success based capital expenditures.

Fitch's Recovery Ratings (RR), introduced in 2005, are a relative indicator of creditor recovery on a given obligation in the event of a default. A broad overview of Fitch's RR methodology as it relates to specific sectors, including a Case Study webcast, can be found at www.fitchratings.com/recovery.> Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. The issuer did not participate in the rating process other than through the medium of its public disclosure.