Merrill Lynch and Bear Stearns have committed $12.36 billion in financing to back the Dolan family's $19.2 billion bid to take Cablevision private. The financing will include approximately $9.55 billion of senior secured credit facilities and $2.81 billion of senior notes, according to a Securities and Exchange Commission filing. The debt would be split between Cablevision's numerous holding companies, including Super Holdco, CSC, Intermediate Holdco, Rainbow Programming Holdings, Rainbow National Services and Regional Programming Partners. A company spokesman declined comment. Bankers at Merrill Lynch and Bear Stearns also declined comment.
In the past two years, the company has tried to take the company private for $7.9 billion and twice attempted to take out a $3 billion dividend, which was finally carried out in April, paying shareholders $10 per share. "I think that if people see fatigue in this name if they can get out at par now they will," said one investor. Cablevision System Corp.'s 8% '12 bonds fell five points to 96 1/2; Cablevision's term loan was wrapped around par. A dealer said the debt has not really moved since the news.
One portfolio manager said his firm viewed the possibility of the deal going through at about 55%. "I don't think their ability to finance the deal will be a factor, I just think it will be completely controlled by the Dolans' ability to get it done." He anticipates there may be some minority shareholders that will try and block the move. Another investor said, "People are wary of the whole Dolan family and if there is a way to hold them up in order to get more money out of them, you can bet people will do that."
Another market source commented that the deal would ultimately depend on the shareholder meeting, which has yet to be scheduled. The Dolans currently control 74% of Cablevision's shareholders vote through special class stock and own 22.5% of the company's stock.
Merrill Lynch and Banc of America Securities offered to back a bid by the Dolans to acquire Cablevision for about $7.9 billion in June 2005. The family retracted the bid in October 2005 after investors were turned off by the proposal to spin off Rainbow Media Holdings, which includes Madison Square Garden, the New York Knicks, the New York Rangers and Radio City Music Hall (CIN, 7/24). Instead of the buyout, the company asked investors to approve a $3 billion dividend, which would have netted the Dolan family approximately $600 million and increased debt leverage to about 5.2 times. The deal was cancelled in December after the company said it had violated terms of a bank loan due to $18 million in debt owed to a vendor. The company reconsidered the dividend again in February and it was completed in April.
"It's always something with these people," said one investor. "We've been there with the Dolans before. There's a lot of pain and suffering with these people, especially if it's a private company."
Standard & Poor's noted that if the Dolan's proposal for the takeover were to be 100% debt-financed, debt to EBITDA leverage would be nearly 10 times, as opposed to the six times currently expected for 2006. "[Leverage] is pretty aggressive, but besides the family, the company is pretty solid and the management team is too," an investor said.