Cablevision pulls $1 bln cvt, AT&T to sell $1.75 bln stock, cvts instead

By Peter Heap

New York, Oct. 5 - Cablevision Systems Corp. Friday said it has canceled plans to sell $1 billion of convertible preferred stock exchangeable for Cablevision NY Group class A common stock - but AT&T stepped into the breach and announced an offering of $1.75 billion of convertibles exchangeable for that same stock and the stock itself.

Cablevision blamed "general market conditions" for its decision not to go ahead with the offering and added that it is examining financing needs and options for Cablevision NY Group.

But its decision not to go ahead clears the way for AT&T's offering, which will total $1.75 billion, divided between exchangeable trust securities mandatorily convertible into Cablevision NY Group class A common stock and the common stock itself.

The greenshoe on the offerings could take the total size to just over $2 billion, according to AT&T and filings with the Securities and Exchange Commission. At that size, it would represent AT&T's entire stake in Cablevision Group, AT&T said.

An AT&T spokeswoman told Prospect News that the company has not yet decided how the total $1.75 billion will be divided between the two components and that the split will depend on market conditions. However filings with the SEC point to an equal divide between the two.

Lead managers for the offerings will be Bear, Stearns & Co., Merrill Lynch & Co. and Salomon Smith Barney.

Syndicate officials said Friday there is no further definite information at this point but that more details may emerge over the coming week.

Cablevision originally registered its proposed offerings - it also planned to sell stock alongside the convertible - with the SEC on May 30. Under a stockholders agreement between the two companies, AT&T agreed not to engage in transactions involving Cablevision equity securities for up to 180 days after the effective date of that original registration statement. Cablevision noted that such a time period is the same as the shortest period that similar restrictions are imposed on directors, officers and affiliates.

AT&T had asked Cablevision to register 30 million of its Cablevision NY shares on April 5 but on May 4 Cablevision exercised its right not to proceed.

The convertibles will be sold via financing vehicle Equity Securities Trust I. The trust will hold forward purchase contracts and zero-coupon Treasuries, the Treasuries maturing quarterly in order to pay distributions to investors and the purchase price for the forward contract.

However, AT&T has the option of settling in cash instead of delivering shares when the agreement becomes effective in 2004. The precise date in 2004 has not yet been set, according to the SEC filing.

Equity Securities Trust I will issue 21,279,206 securities - equivalent to $872 million at a Cablevision NY Group stock price of $40.975 - and there is a greenshoe of 3,191,880 securities, which would take the total to $1.003 billion.

The proposed stock offering is for similar amounts, for a total of 48,983,172 shares including greenshoes, worth $2.005 billion at a $40.975 stock price.

AT&T also said that Cablevision has agreed to file a registration statement for the sale of some or all of AT&T's Rainbow Media Group tracking stock following the sale of its Cablevision NY Group common stock.

Cablevision added that it is evaluating Cablevision NY Group's financing needs for 2002. Options could include the sale of assets, borrowing under its bank credit facilities, reducing capital expenditures and other investment spending and/or the issuance of debt, preferred stock and/or equity securities.

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