Cablevision, Charter Rework Debt


Two of the more heavily leveraged MSOs — Cablevision Systems Corp. and Charter Communications Inc. — made moves last week to refinance some of their debt, easing interest-payment obligations.

Cablevision Systems Corp. kicked off the week by announcing a deal where it would buy about $1.5 billion in preferred shares in its holding company CSC Holdings, which CSC would then use to pay down some of its bank debt.

At the same time, CSC Holdings said it would issue about $500 million in bonds.

The $2 billion deal was expected, and was seen by many in the analyst community as the next logical step before Cablevision spins off its direct-broadcast satellite subsidiary, Rainbow DBS Inc.


In a research note, UBS Warburg cable debt and equity analyst Aryeh Bourkoff said the Cablevision offering — completed March 31 — would save the company about $66 million in interest payments.

Oppenheimer & Co. cable analyst Tom Eagan said in a research note he expects the next step to be a refinancing of Rainbow Media Holdings (Cablevision’s programming arm) debt, followed by the filing of a Form 10 with the Securities and Exchange Commission for approval of the Rainbow DBS spin-off.

Eagan estimated Cablevision’s interest savings (about $70 million) could spur an increase in the cash-flow trading multiple for the cable unit. He estimates that Cablevision is currently trading at about 8.7 times estimated 2004 cash flow, about half a multiple point lower than cable peers like Cox Communications Inc. and Comcast Corp.

Cablevision’s share price was down 12 cents, to $22.88, March 31, after rising 44 cents the day before.

Cablevision also said that although it plans to meet full-year guidance for 2004 (revenue growth of 12% to 14% and adjusted operating cash flow growth of 13% to 15%), first-quarter results might be below expectations because of the recent arbitration decision concerning carriage of the Yankees Entertainment & Sports Network.

Cablevision said adjusted operating cash-flow growth would be hit harder in the first quarter because the agreement with YES, television rightsholder to Major League Baseball’s New York Yankees, will be retroactively applied without the benefit of rate increases.

After the ruling, Cablevision agreed to carry the YES Network on expanded basic. Cablevision has said it will raise rates 95 cents per month as a result of the deal with the regional sports network.

Cablevision is reportedly paying YES $1.85 per subscriber per month for the service.


Charter, one of the most heavily levered MSOs in the country — with about $19 billion in debt — announced two deals that will refinance about $8 billion in credit lines.

Charter said it would take out a new $6.5 billion bank facility and issue about $1.5 billion in senior notes.

The bond deal coupled with the new bank facility would refinance bank debt at four of Charter’s bank borrowing facilities.

According to Bourkoff, the deals don’t lower Charter’s leverage, but they do extend debt maturities, improve liquidity and simplify the capital structure of the St. Louis-based MSO.