Tier-2 Troubles: WOW! Gets Downgraded by S&P Again

There's trouble brewing for tier-2 cable operators.

A little over a week after downgrading Cable One for the second time this year, S&B Global revised WideOpenWest (WOW!) from “B” to “B-minus.”

“WOW! has limited liquidity and has exhausted its revolving credit facility,” the credit rating agency wrote in a note published late last week.

“As of June 30, 2024, [WOW!] had about $21 million of cash on balance sheet but no availability under its $250 million revolving credit facility due December 2026,” S&P added. “It recorded nearly breakeven free operating cash flow (FOCF) during the second quarter of 2024, primarily due to a sizeable pull back in its expansion capex spend, which will hurt WOW!’s longer-term competitive positioning, in our view.”

The move followed another downgrade by S&P for WOW! from “B-plus” to “B” back in May.

Also in May, WOW! received a cash buyout offer from DigitalBridge Investments LLC and “various Crestview entities,” with the private-equity interests proposing to purchase all outstanding WOW! shares not already owned by Crestview for $4.80 a share.

As Ted Hearn’s Policyband Substack noted Monday, WOW! CEO Teresa Elder hasn’t provided an update on the offer, saying only that a board committee is looking at it.

WOW!, which lost 4,700 broadband customers in the second quarter, isn't alone in its tier 2 struggles.

On August 14, S&P downgraded Cable One from “stable” to “negative,” after the Phoenix-based cable operator lost 8,900 high-speed internet customers in Q2.

“We believe Cable One's business prospects have deteriorated due to increasing competition from fiber-to-the home (FTTH) and fixed wireless access (FWA) providers,” S&P said. “As a result, we revised our downgrade threshold for the rating to 4x from 4.25x.”