LONDON -- Standard & Poor's Ratings Services said that it has assigned its 'BB-' long-term corporate credit rating to German cable TV operator Kabel Deutschland GmbH (KDG). The outlook is stable.

At the same time, Standard & Poor's assigned its 'B' debt rating to KDG's euro- and U.S. dollar-denominated senior unsecured notes offering for the equivalent of €700 million, maturing in 2014, and its 'BB-' debt rating and '2' recovery rating to KDG's senior secured bank loan of up to €2.6 billion with final maturity in 2013.

The debt rating on the bank loan is the same as KDG's corporate credit rating; this and the '2' recovery rating indicate that senior lenders can expect substantial recovery of principal (80%-100%) in the event of a default.

KDG's ratings reflect the company's position as a leading, but highly leveraged, cable TV operator in Germany. The chief rating supports are KDG's stable core analog TV revenues--which benefit from certain utility characteristics--manageable capital expenditures, and positive free cash flow generation. The company is constrained, however, by its high leverage, strong price regulation, and increasing competition--both from various technology platforms and from Level 4 operators that own the direct access to a significant portion of its customer base. KDG's ratings are also predicated on expectations that the interest rate on the notes will not exceed 11%.

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