OREANDA-NEWS. S&P Global Ratings today assigned its 'BBB' issue-level rating to Cox Communications Inc.'s (CCI's) proposed notes (maturity and amount to be determined). CCI is an Atlanta-based diversified media and cable company and wholly owned subsidiary of Cox Enterprises Inc. (CEI).

We expect CCI to use proceeds from the sale of the notes, along with other available funds, to fund a voluntary pension contribution payment or repay existing debt. CCI's unfunded pension and other post-retirement obligation balance was about $3.4 billion as of June 30, 2016. Because we tax-adjust this amount ($2.2 billion), the increase in debt from the proposed new unsecured notes does not fully offset the lower pension obligation in our leverage calculations. However, we expect that any tax savings from the pension contribution will be used to repay additional debt at CCI or CEI. As a result, we do not expect the transaction to materially affect key credit measures, including adjusted debt to EBITDA, which was about 3x as of June 30, 2016.

Our 'BBB' corporate credit rating and negative outlook are unchanged. The outlook reflects our view that CEI's leverage is high for the rating level. We could lower the rating over the next year if the company is unable to grow EBITDA and allocate free operating cash flow to consistently reduce leverage below 3x.