Cable One Lender Seeks to Block $480 Million Mega Broadband Deal

Lender CoBank ACB filed a lawsuit Friday seeking to block Cable One Inc. from acquiring a 55% equity stake in Mega Broadband Investments from private equity firm GTCR.

CoBank, which says it holds about $1.1 billion in secured credit issued by Cable One, asked a federal judge in New York to issue an emergency restraining order to prevent the cable operator from transferring about $480 million for the acquisition of Mega Broadband. According to the complaint , Cable One had disclosed in the past that the equity is worth a fraction of that amount, if not worthless, and the company is “currently insolvent based on standard valuation methodologies.”

The lender said the transfer of funds would make Cable One “sink deeper into insolvency and make its remaining assets unreasonably small given its already large debts.”

Representatives for Cable One, CoBank and GTCR didn’t immediately respond to requests for comment.

Cable One has been seeking new debt with urgency since the start of the year, when it agreed to acquire the 55% stake in Mega Broadband Investments from GTCR after the private equity firm exercised a put option to sell its share. The cable operator faces an Oct. 9 deadline to complete the purchase.

The cable company is finalizing a deal for $1.25 billion in new debt to meet that commitment, structured as a first-lien term loan, with existing lenders as well as new investors putting in money, Bloomberg previously reported.

In regulatory filings, Cable One has acknowledged the equity is worth about $54 million, CoBank argued in the lawsuit. “Cable One is therefore aware and has confirmed to the investing public that the put price is grossly disproportionate to the value of the MBI equity Cable One received in exchange.”

The case is CoBank ACB v Cable One, 26-cv-8935 , US District Court, Southern District of New York.