This a tale of a young man who, before leaving his parents' home, must visit his local banker and take out a loan to enrich the folks. The parents will be pleased -- maybe even fat and happy -- but Junior might struggle a bit with his newfound loan payments.
That's how things might turn out for Time Warner Cable (NYSE: TWC ) , which will achieve its spinoff from Time Warner (NYSE: TWX ) only after it coughs up $10.9 billion to its corporate parent. While a portion of the amount will go to its own existing investors, an overwhelming 84% ($9.25 billion) will grease Time Warner's palm, reflecting the conglomerate's current ownership percentage in the cable business.
As a result, the cable company will find itself groaning under about $24 billion in debt. If we look at the ratio of debt to a year's worth of earnings before interest, taxes, depreciation, and amortization (EBITDA) -- a typical way to measure corporate leverage -- Time Warner Cable will check in with a 60% heavier load than industry leader Comcast (Nasdaq: CMCSA ) . Cablevision (NYSE: CVC ) , on the other hand, lugs around a debt load that's 160% greater than Comcast's, and is impossible for me to justify.
Comcast often draws criticism for carrying what some investors view as insufficient debt. But with consumers pulling back on discretionary expenditures, and cable services' need to add new offerings like wireless Internet to stay competitive with new rivals like Verizon (NYSE: VZ ) and AT&T (NYSE: T ) , this may be a time when traveling light is the way to go.
Finally, if I find cable an attractive investment (and I do), I'm nonetheless unlikely to buy shares in all the operators. Indeed, since Time Warner's offspring is less likely to pay a regular dividend because of its debt service requirements, I'm more inclined to buy Comcast. The big enchilada of cable isn't just a superbly managed company in my book -- it's also the group's sole dividend payer.
So Fools, if you're considering adding a cable company to your holdings, you've just gotten one more reason to follow me toward Comcast.