DBRS Places Cablevision Systems & CSC Holdings UR-Negative

Dominion Bond Rating Service (“DBRS”) has today placed the ratings of Cablevision Systems Corporation (“Cablevision” or the “Company”) (rated B) and its wholly owned financing subsidiary, CSC Holdings, Inc. [rated BB, BB (low), and B (high)] “Under Review with Negative Implications” following today’s announcement that the controlling family, including Charles F. Dolan, have put forward a proposal to the Company’s board of directors to spin off its media assets and subsequently privatize its cable business.

Should this proposal be accepted by the board of directors of Cablevision and proceed as planned, DBRS notes it is likely the Company’s current ratings would be lowered from their current levels given the increase in debt and financial risk applied both indirectly and directly to the Company’s cable business.

The privatization would be achieved by the family purchasing roughly 80% of the equity that it does not already own for US$7.9 billion. This transaction would value the cable business at roughly US$13.6 billion (US$4,377 per subscriber), including approximately US$6.4 billion in gross debt currently outstanding. Preceding this transaction, the Company would spin off its Rainbow Media Holdings LLC (“Rainbow Media”) business, including its national cable channels, Madison Square Garden, and other assets, to shareholders in the form of a share dividend. DBRS estimates that this would value the media business at roughly US$5 billion (enterprise value).

The Company has indicated that the financing required to privatize the cable business would be US$6.8 billion (including refinancing the Company’s existing credit facility) and that its lead banks have agreed to fully support the all-cash consideration payable to the public shares. As part of this financing, roughly US$4.25 billion in debt would be placed in a new holding company above the current operating and holding company structure (CSC Holdings, Inc. and Cablevision, respectively). The new entity on a consolidated business would support roughly US$12.5 billion (over US$4,000 per subscriber), which would be quite high for any cable franchise.

As part of its review, DBRS will monitor the progress of the proposal and will incorporate other details of this transaction as they emerge. DBRS expects to consider the incremental debt at the operating level along with the support required to fund the additional debt at the new holding company.

DBRS notes this proposal follows similar activity by other U.S. cable operators recently namely, Cox Communications Inc. (“Cox”) and Insight Communications Company, Inc. (“Insight”) who chose to take their cable businesses private given languishing share prices and attractive financing. Cox completed its privatization in December 2004, while Insight’s proposal remains subject to shareholder approval.

Details of the proposal put forward to the board of directors from the Dolan family are as follows:
(1) Cablevision will spin off its Rainbow Media assets to shareholders at an estimated value of US$12.50 per share, or approximately US$3.6 billion of equity value;
(2) Subsequent to the above spin-off, The Dolan Family will then purchase the 80% of the Company’s shares that it does not already own for US$21.00 per share or US$7.9 billion of equity value.

Cablevision is a large cable operator in the New York City area with roughly three million subscribers. It also owns programming assets under Rainbow Media, including Madison Square Garden.