Cablevision, others chip away at wall of debt

April 13, 2010

A looming wall of debt can be a scary thing. Nearly $830 billion of risky dollar-denominated corporate debt comes due between 2012 and 2014, according to JPMorgan. At first sight that casts a long shadow over credit markets. But borrowers like Cablevision <CVC.N> are already tweaking their obligations. By the time 2012 comes around, the wall will be much smaller.

In fact half the debt in question doesn’t mature until 2014. That means companies and their lenders have some time to pull their bricks out of the wall early — with the help, for the moment, of investors eager to buy new debt.

New York-area cable and internet operator Cablevision Systems took advantage this week. It refinanced debt due in 2012 with $1.25 billion of notes maturing in 2018 and 2020. Moreover, it didn’t have to pay higher interest rates on the new debt than the 8 percent it was paying on the old notes. Cablevision subsidiary CSC Holdings, meanwhile, took $3 billion of its own out of the debt wall by extending maturities into 2015 and 2016.

Cablevision isn’t alone. Charter Communications on March 31 said it extended $3 billion of loans to 2016 from 2014. Harrah’s Entertainment plans to pay off debt that was due in 2010-11 with the cash raised by issuing new bonds that mature in eight years.

Individual efforts to refinance and extend debt may not be enough to completely flatten the wall, but combined they should hammer it down to a much more manageable size. In fact, the wall is already less formidable than it was 15 months ago. Credit Suisse estimates that the volume of leveraged loans due to mature between 2012 and 2015 has fallen by $100 billion since late 2008.

Free flowing credit, of course, is essential to the companies wielding their pickaxes ahead of time. This year it’s been readily available in the junk bond market where nearly all new debt sold in the first quarter of this year will mature in 2015 or later, according to Fitch Ratings. As long as credit investors remain receptive, the 2012-14 debt wall won’t by then be the worrying obstacle it now appears.

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