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Rainbow spinoff plans hinge on refinancing

Major financial hurdles still to be crossed

NEW YORK — If Cablevision investors were looking to ease their concerns about the prospects and costs of its new Voom satcasting platform, they probably didn’t find comfort in documents filed with the SEC this week outlining the company’s plan to spin off Rainbow Media Enterprises.

New York area cabler hopes to spin off the unit — which comprises the nascent high-definition satcaster along with cable nets AMC, IFC and WE and Clearview Cinemas — to shareholders later this year.

But there are still some major financial hurdles to cross before Cablevision can take the entity to the stock market, analysts noted.

Company has indicated that the stock listing is dependent upon refinancing all of Rainbow’s outstanding debt load of up to $1 billion. That could prove challenging given current weakness in the high-yield bond markets and the high-risk nature of Voom.

Cablevision is already committed to spending some $237 million to fund Voom this year and claims it has financing in line from banks and existing credit facilities to fund the startup service through the first quarter of 2005.

Analysts at JPMorgan said the tenuous funding environment could delay the spinoff and prompt further investment by parent Cablevision — the one thing investors are anxious to avoid.

To date, Voom has 8,000 subscribers but had a 21% churn rate in its first several months. Company admitted in its Form 10 that the service got off to a bumpy start with insufficient programming, some technical issues with receivers and overly high equipment prices.

Service now offers 36 channels in high-def, 21 of which are new and exclusive to Voom; over 80 channels of standard-def programming; and 18 channels of audio programming. Programming packages are currently priced from $39.90 to $79.90 per month.

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