Cable One Blocked From Mega Broadband Deal for Now by Judge

Cable One Inc. was temporarily blocked by a federal judge from acquiring a 55% equity stake in Mega Broadband Investments from private equity firm GTCR, after lender CoBank ACB sued to stop the deal.

US District Judge J. Paul Oetken in New York issued a decision late Friday stopping Cable One from executing the purchase until a court hearing can be held. The judge didn’t specify a date for the hearing in his order.

Earlier in the day, CoBank sued to block the transaction. The lender, which says it holds about $1.1 billion in secured credit issued by Cable One, sought 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.”

A representative with Cable One declined to comment. Representatives for CoBank and GTCR didn’t immediately respond to requests for comment on the suit or the order.

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.