Cablevision Board Backs Dolan’s $3B Payout Plan

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Cablevision Systems Corp. chairman Charles Dolan’s plan to put $3 billion of borrowed money into the hands of his shareholders is beginning to move forward.

Dolan — who on Oct. 24 scrapped plans to buy the remaining shares of Cablevision his family didn’t already own and take the cable company private — had recommended to the board of directors that it issue a $3 billion dividend to shareholders.

Last Wednesday morning, Cablevision filed a document with the Securities and Exchange Commission stating that its board of directors authorized management “to take all steps that would be necessary to implement a $3 billion special dividend payable pro rata to all shareholders.”

Issuing the dividend would require approval from the board after the analysis is completed.

That dividend is expected to mean about $10.40 per share for each shareholder.

The Dolan family, which owns about 68.8 million Cablevision shares, would reap about $715 million from the one-time payout.

Some analysts expected Cablevision’s board to reject the special dividend, mainly because it would have to be paid with borrowed money.

Oppenheimer & Co. cable and satellite analyst Tom Eagan had estimated that borrowing $3 billion would push Cablevision’s leverage (or indebtedness) ratio from about five times estimated 2006 cash flow to seven times that estimate.

Merrill Lynch & Co. media analyst Jessica Reif Cohen wrote that by taking on more debt in an increasingly competitive environment, “investors may view increased leverage with concern.”

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