Dolan to Use Cash, Stock to Fund Voom

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Cablevision Systems Corp. chairman Charles Dolan said in a securities filing Thursday that he will fund the operations of fledgling HD direct-broadcast satellite unit Rainbow DBS (also known as Voom) until March 31 with about $10 million of his own cash and Cablevision stock.

Earlier this week, Voom, which was scheduled to be shut down this month, got a reprieve until the end of March after Dolan agreed to cover any of the costs of operating the service in excess of what it would cost Cablevision to shut the service down.

In a securities filing Thursday, Dolan agreed to contribute a combination of cash and some of his class-A and class-B Cablevision shares worth about $10 million to Cablevision to fund the service.

According to the document, withdrawals will be first made in cash, then class-A stock and, finally, class-B stock. After the termination of the deal March 31, any unused portion will be returned to Dolan.

In a research report, Fulcrum Global Partners LLC analyst Richard Greenfield said the arrangement eases any investor fears that Cablevision would have to fund Voom and proves Dolan’s willingness to fund the satellite venture with his own money.

However, Greenfield believes this is a short-term measure and will ultimately lead to the sale of Cablevision.

“While selling stock on a reactionary basis (as bills come in) will keep Voom going, we think it is very tax-inefficient and does not maximize the value per share,” Greenfield wrote. “In turn, we believe Mr. Dolan is likely preparing (or will shortly come to the conclusion) that the only way to fund Voom long-term is to put Cablevision up for sale.”

Cablevision shares were priced at $29 each in afternoon trading Thursday, down 22 cents each.

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