Argentine Cable Back in Market

Now that the uncertainty surrounding its ownership has diminished, Cablevision SA is returning to the capital markets with a vengeance.

The Argentine cable distributor began a roadshow for a $50 million commercial paper program last week and is preparing to issue $250 million in term financing within the next four months, a source close to the firm said.

After over a year of wrangling, co-owners Telefonica de Espana SA and Hicks, Muse, Tate & Furst announced that Hicks, Muse would take over Telefonica's stake in Cablevision. Spreads on Cablevision's 13.75% coupon bonds due in 2009 have tightened 130 basis points since December 13, and are now trading at 651 basis points over Treasurys.

"The market needed to hear a clarification of the shareholder structure from Cablevision, and that definitely makes it easier for [them] to approach the market now," the source said.

And this is exactly what the company's management is preparing to do. Last week Cablevision and lead manger BancBoston began courting investors to sell them on a 365-day euroclearable commercial paper deal. The $50 million transaction received a double-B rating from Standard & Poor's Ratings Service and will be sold locally and offshore with a coupon between 10.5% and 11%, a source close to the deal said.

But Cablevision is probably going to be taking out some long-term paper too, he said.

Not only is Cablevision staring down $350 million in bond payments this year it is also looking to expand its broadband network to allow for Internet servicing, said Bruce Stanforth, corporate fixed income analyst for Latin America at BNP Capital Markets.

"I'd be surprised if they didn't come by the end of the first half of the year on the outside," said one source familiar with the company. "And it'll probably be in March or something like that."

While the issuer has yet to pick a bank, its first term financing since last March is likely to amount to roughly $250 million, another source said.

Company management has already started laying the groundwork for such a transaction, the source said. Last month Cablevision amended covenants on its Series II and Series III floating rate notes. The amendments reduced interest coverage covenants on the securities and changed language earmarking any proceeds from a long-term bond for payments on the FRNs.

But until Cablevision actually brings a deal to market, investors and analysts alike will be watching how the company expands now that Hicks, Muse is firmly in the driver's seat.

"My guess is that they'll try to turn it into a miniature Time Warner," said Chris Taylor, Latin America media and telecom analyst at ING Barings. Hicks Muse's other subsidiaries will provide Cablevision with the content it needs for its cable network and the company is widely expected to take on a telephony provider as a partner by year's end.

Although the transfer of ownership has yet to be finalized, Cablevision's future is looking brighter now that its ownership structure is no longer a cause of uncertainty, said Cesar Baez, partner responsible for Latin America at Hicks, Muse. "I cannot tell you whether that is making the market more receptive, but I can tell you that we are going ahead to create value," he said. "With the shareholder issue being resolved we can get back to moving forward."

And for the most part investors seem to believe in this story. "I like what happened with the divestiture of their telephone assets," said Marc Heimowitz, senior analyst at Standard Americas Asset Management. "They're moving into a more independent strategy. It lets them hook up with a different telephony provider and move toward a bundled services product."