Cablevision: Rainbow Probe Done


Cablevision Systems Corp. said the independent investigation of accounting practices at its Rainbow Media Holdings Inc. units has been completed, clearing the way for the MSO to refinance its debt and initiate the planned spinoff of its satellite unit, Rainbow DBS.

In its 10-K annual report filed late Monday, the MSO said independent investigators Wilmer Cutler Pickering LLP have completed their probe into the accounting practices of Rainbow Media’s AMC and WE: Women’s Entertainment cable networks.

Cablevision said last year that it had discovered improper expense accruals at the networks, which led to the firing of 14 Rainbow Media executives, including AMC president Kate McEnroe.

As a result of the Wilmer Cutler investigation, Cablevision reduced its operating-income figures for 2001 by $21.8 million to a loss of $211 million. Operating income for 2002 was reduced by $8.5 million to $191 million.

Investors appeared to be pleased, driving Cablevision stock up 3% (73 cents per share) in afternoon trading Tuesday to $23.47 each, but the stock settled to $23 at the close of trading.

"The company's financials are now clean and audited, lifting a major accounting overhang that has been weighing on the company for the past year," UBS Warburg LLC cable debt and equity analyst Aryeh Bourkoff said in a report.

"This filing clears the way for Cablevision to refinance its debt and preferreds and sets the stage for a spinoff of the DBS business and a return to a focus on fundamental growth," he added.