S&P report adds to Cablevision woes

Agency outlines possible problems for cable operator

Cablevision’s plans to raise additional funds on the public market could get a lot more expensive.

Credit ratings agency Standard & Poor’s Wednesday placed the Bethpage, N.Y.-based media group and related entities on CreditWatch with negative implications, citing the recent disclosure of a formal SEC investigation into its accounting improprieties at its Rainbow Media unit last month.

Cablevision is one of the most highly leveraged U.S. cable operators with some $6.4 billion debt outstanding (excluding collateralized indebtedness of $1.6 billion). The company’s preferred stock totals another $1.6 billion.

Cablevision is looking to refinance some of its borrowings as it embarks on its planned DBS satellite project and buys back MGM’s 20% stake in Rainbow for a total consideration of $500 million.

“While the magnitude of the discrepancies reported by Cablevision does not appear to be material, Standard & Poor’s cannot currently quantify the potential impact of the formal SEC investigation at this time,” said credit analyst Catherine Cosentino. “Nor can Standard & Poor’s predict whether the review will extend beyond the issues already raised by Cablevision or say what ramifications an expanded review would have for Cablevision’s business prospects.”

Spinoff threatened

The ratings agency said it will monitor the progress of the investigation to “gain additional clarity on what the review means for Cablevision’s financial and business prospects.” Specifically, the investigation could threaten Cablevision’s ability to spin-off of its satellite business later this year as originally planned.

Cablevision is also involved in a bid for Vivendi Universal Entertainment with Edgar Bronfman Jr., though the cabler is contributing only its Rainbow cable nets, and no cash, to the effort.

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