Merge with Cablevision possible

BUENOS AIRES — Argentina’s debt-ridden No. 2 cable system Multicanal may end up in the arms of rival Cablevision.

If the two merge, the resulting firm would cover 60% of the country’s 5 million cable homes.

Cablevision shareholders — Hicks, Muse, Tate & Furst, Liberty Media and UnitedGlobalCom — and Multicanal’s parent Grupo Clarin discussed a possible link-up in May.The merger would shore up Multicanal’s finances as it seeks to make payments on its $850 million debt, about half of which comes due in the next 12 months, says Bruce Stanforth, a corporate debt researcher at investment bank BNP Paribas in New York.

To pay $150 million of it, Grupo Clarin is said to be planning to sell its 5% stake in satcaster DirecTV Latin America. To come up with the remainder, Multicanal, which ran up the debt during an acquisition spree in the 1990s, must find a “deep-pocketed partner,” says Stanforth.

Grupo Clarin has been looking for several years, and nearly brought in Spain’s Telefonica in 1999. But Telefonica pulled out at the last minute after Grupo Clarin refused to give up control of Multicanal.

With debt payments looming and the country’s economic crisis restricting fresh funds, Grupo Clarin can no longer keep control of Multicanal, says Stanforth. With “no other buyers in the wings,” Cablevision may be the only option, he adds. The merger would give Cablevision access to infrastructure and subscribers in order to roll out higher-value services like telephony and high-speed Internet access.

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