Holding Steady Key For Patriot

Any operating slippage could quickly result in covenant tightness for Patriot Media & Communications, which is wrapping up a $185 million bank facility. Moody's Investors Service has assigned a B1 rating to the credit, citing high leverage, limited size and geographic concentration and the very modest amount of free cash flow that is expected to be generated over the intermediate term. The company is expected to burn cash over the course of 2004, Moody's notes. But the company is bolstered by strong demographic characteristics of its market and management's ability to successfully achieve its operating and financial goals during its first full year of operations. There is also the presence of a large financial sponsor through which sufficient equity contributions have been made, Moody's adds.

The outlook is stable, incorporating the company's good prospects for generating strong incremental cash flow growth following the completion of its network update, which is expected in the first half of 2004. Moody's expects leverage around six times on a debt-to-EBITDA basis at the inception of the new financing.

The company is amending its existing facility to lower pricing and increase the "B" facility by $20 million, according to Jim Holanda, Patriot's president. The facility comprises a $40 million revolver, $25 million "A" loan and $120 million "B" loan. The pro rata matures in 2010 while the "B" loan is due in 2011.

Patriot approached Bank of New York, which leads the facility, with the idea for the amendment, Holanda said. Ten other banks are involved in the deal. Patriot was formed when RCN Corp. sold its central New Jersey cable systems to Spectrum Equity Investors and cable entrepreneur Steve Simmons for $245 million in February 2003.