Cablevision Bonds Drop on Privatization Plan

Strategic Insights -

Cablevision Systems Corp. (CVC) has announced that its founding family, the Dolan family, will attempt to take the company private in a $7.9 billion deal. The move has caused a significant drop in the company's bonds, with its 8% notes due 2012 falling by about five points to 98. This news comes as a surprise to investors, who had expected the company to maintain its current structure. The privatization plan involves spinning off certain cable network programming businesses, sports teams, and properties into a separate public company called Rainbow Media Holdings.

Key Takeaways:

  • The Dolan family's privatization plan will involve issuing about $4.25 billion in new debt at the holding company level.
  • Moody's Investors Service has placed all of its ratings for Cablevision and CSC Holdings under review for a downgrade, citing the increased debt load.
  • Fitch Ratings has placed CSC Holdings' double-B-minus senior unsecured debt rating and single-B-plus senior subordinated rating on negative watch.
  • Cablevision's senior notes are currently rated B3, while CSC's senior unsecured notes are rated B1.
  • The overall secondary market was quiet and slightly soft, with traders reporting about a 1/8 point decline in prices.
  • Goodyear Tire & Rubber Co. plans to sell $400 million in 10-year senior unsecured notes to repay part of an existing credit facility.
  • Qwest Communications International Inc. completed a $200 million add-on to its issue of 7 1/2% notes due 2014.

Statistics:

  • Cablevision's 8% notes due 2012 dropped by about five points to 98.
  • CSC's 7 5/8% notes due 2011 fell by about five points to 99.
  • Saks Inc.'s 7% bonds due 2013 gained 2 1/2 points to 99 1/2.
  • The privatization plan will involve about $4.25 billion in new debt at the holding company level.
  • Moody's currently rates Cablevision's corporate family Ba3.

Sources:

  • Dow Jones Commodities News via Comtex
  • MarketAxess
  • Moody's Investors Service
  • Fitch Ratings
  • Simona Covel, Dow Jones Newswires; 201-938-2371; simona.covel@dowjones.com
  • COMTEX (http://www.comtexnews.com)
  • IFR Credit
  • Standard & Poor's
  • Qwest Communications International Inc. press release