Street buzzing on Cablevision talk


Shares and bonds of Cablevision Systems were on the move last week after the Dolan family that controls the cable operator made another offer to take the company private.

The stock jumped on the day of the news, but bonds came under pressure as credit agencies raised some debt concerns.

Standard & Poor's Ratings Services said it will consider cutting its longterm debt ratings for the firm due to "the potential significant degradation of credit measures if the transaction were to be significantly debt-financed," which the Dolan family signalled would be the case.

As a result, fellow credit watchers Fitch and Moody's placed Cablevision on similar debt ratings reviews.

Meanwhile, equity analysts generally predicted that the new Dolan offer has a better chance of winning approval from a comittee of independent directors of Cablevision, but several warned that the stock has little room for growth.

UBS analyst Aryeh Bourkoff said there is "not much upside left."

Oppenheimer & Co. analyst Thomas Eagan even downgraded the stock from "buy" to "hold," as it has been trading too close to the Dolan's $27-per-share offer. "We believe there is more risk than reward in buying the stock, as we expect it is more likely that the bid is accepted or falls through completely than a higher bid emerges," Eagan said.

Time Warner may make a takeover play for Cablevision's cable assets somewhere down the line, but it is unlikely to submit a bid "within 6-9 months, as it could negatively impact the Time Warner Cable spin out, expected in early 2007," he argued.

Citigroup analyst Jason Bazinet though said Cablevision shares could rise a bit further -- to his price target of $28. While Pali Research analyst Richard Greenfield raised his target to $30.

Overall, most Wall Street analysts suggested the Dolans would make a good business decision by taking Cablevision private at a good price -- and later potentially deciding to sell off parts.

"We believe the Dolans are hoping to capture 100% of the upside of an eventual sale of Cablevision to Time Warner (or Comcast) in 2007-08 rather than simply benefiting from their 23% share of Cablevision's equity," Greenfield said.

But several Street observers took issue with the Dolans' argument that a private firm would be more flexible to compete in a challenging marketplace. Said Eagan: "To us, the Dolan family has not shied away from making highly controversial decisions, such as the bid
for the West Side of Manhattan railyards."