Insight Auction Put on Hold

9/14/2007 8:00 PM Eastern

Private-equity giant The Carlyle Group has put its auction of Insight Communications on hold, apparently because some prices for the midsized cable company fell short of expectations and because of difficulties in obtaining debt financing for a deal.

“Right now, the debt markets are wreaking havoc on big deals,” one cable executive familiar with the auction process said, confirming a Sept. 10 article on the The Wall Street Journal's Web site to that effect.

Insight executives did not return a call for comment.

Carlyle invested about $2 billion for its stake in Insight in 2005, including about $1.3 billion in debt. The cable company went private at the time, and was put on the market earlier this year.

Interested bidders included Time Warner Cable, several private-equity players such as Providence Equity Partners and Texas oil billionaire Robert Bass' Oak Hill Capital Partners, and smaller cable operators such as Jerry Kent's Suddenlink Communications.

Insight — which will have about 650,000 subscribers in Kentucky; Evansville, Ind.; and Columbus, Ohio, once the previously announced split of its 50-50 Insight Midwest partnership with Comcast closes at the end of the year — was expected to attract prices in the $2.5 billion to $3 billion range. But according to the Journal, some bids came in about $200 million short of expectations.

However, several companies did come in with bids in the $3 billion range, except for Time Warner Cable, according to another executive familiar with the auction. The companies could not pull the trigger on a deal, though, because they could not raise the needed debt financing. That executive said that negotiations are ongoing with those bidders, but that those talks are moot until the debt markets clear up.

Miller Tabak media analyst David Joyce said Time Warner Cable is the most logical buyer for Insight — its systems virtually surround the smaller operator in Kentucky, Indiana and Ohio. He added, in a research note, that the fact that the cable giant was not among the highest bidders in this round shows that it is “disciplined in sticking with a lower, but more assured price for now.”

Joyce said it's likely Time Warner Cable, knowing that most of the other potential bidders would need debt financing, kept its offer purposefully low.

Investment banker Morgan Stanley was heading up the auction, along with New York-based cable investment bank Waller Capital. Reports in August that Morgan Stanley was pulling back its offer to provide some debt financing to private-equity bidders — mainly because of the meltdown in the debt markets due to the sub-prime lending debacle — could have led to the decision to cancel the auction.

But the executive familiar with the auction said that most banks are scaling back lending for big deals, not just Morgan Stanley. He added that even if a deal is reached soon, it would be unlikely to close before year-end.

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