Cablevision's $3.5 billion senior secured term loan broke at 100 7/8 and traded as high as 101 1/4 last week. A trader said demand was high for the loan because of its strong credit rating and good pricing. He estimated upwards of $100 million traded on the break. Bank of America, Citigroup and Bear Stearns lead the deal, which is being used to pay a $3 billion dividend to its shareholders and to pay down a $400 million term loan Cablevision took out in February. The current deal runs pari passu with $2.4 billion of additional facilities the company has outstanding, an investor said.
This is Cablevision's second attempt at paying a dividend. In December, the $3 billion dividend was cancelled after the company breached certain agreements. The term loan is priced at LIBOR plus 1 3/4%. "Once they [Cablevision] get this dividend done, their shareholders should be happy, they've been waiting a while, and so should Cablevision; they got good pricing on the deal and the credit looks solid," the investor noted. Another investor said the deal wrapped so quickly because all interested parties had already gone through the motions so it didn't take a lot to get back up to speed.
Moody's Investors Service rated the term loan Baa3 citing pressure from Verizon and similar broadcast satellite providers. Standard & Poor's rated the credit BB with a recovery rating of 2.
A second investor said that in order for Cablevision to continue to be successful, they must continue to be proactive. "I was surprised when their numbers came out how prosperous their non-cable businesses [high speed internet, digital phone service] were. They had more subscribers than a lot of people figured. They'll need to keep it up too; cable companies are facing a big challenge from satellite providers like DIRECTV," he explained. A Cablevision spokesman declined to comment as did bankers at B of A. Calls to Bear Stearns and Citigroup were not returned.