FaxUpdate March 25, 2005: MORE DEADLINES LOOM FOR VOOM NEXT WEEK

[riffjim4069]

Attached is the latest edition of FaxUpdate, 25 March 2005, for your edification. This article is being posted on the VOOM Forum with permission from the fine professionals at Satellite Business News :up - please obey all copyrights.

Anyway, the key points of the article are, "Cablevision founder Chuck Dolan has made little progress in lining up funding or cutting a deal with EchoStar Communications for satellite capacity for the VOOM DBS service" - "Dolan has also been trying to line up new investors in VOOM, but has found little interest" and "Several sources said they would not be surprised if Dolan asks the board next week for another 30 or 60-day extension, and pledge more of his own assets or Cablevision stock to fund the company"

I'm still reading the article and don't know what any of this means yet...

 

[andrzej]

How reliable is the info in Satellite Business News? Particularly, how do they monitor the progress of Dolan's negotiations? Just wondering.

 

[Walter L.]

Satbiznew have been accurate in the past. But look what they're saying this time:

"Several sources said they would not be surprised ..."

That doesn't sound very convincing to me. The one thing is accurate about the article is that ~30 VOOM customers have filed to FCC (see at http://www.satelliteguys.us/showthread.php?t=59500)

 

[riffjim4069]

How reliable is the info in Satellite Business News? Particularly, how do they monitor the progress of Dolan's negotiations? Just wondering.

I don't work in the satellite news industry, but I can tell you these guys DO have their contacts and DO log quite a few frequent flyer miles. Like any posted article, the events will unfold and we can then speculate on the reliability and credibility of the publication. One thing is for sure, they DO monitor this forum....which is certainly a good thing. Also, they appear to be following the thread on filing comments with the FCC against the sale/transfer of Rainbow DBS Licences

 

[jbphoenix]

That doesn't sound very convincing to me. The one thing is accurate about the article is that ~30 VOOM customers have filed to FCC (see at http://www.satelliteguys.us/showthread.php?t=59500)

make that 31.. I just filed my comments about 10 mins. ago..

 

[Rob Tomlin]

Still doesn't sound very promising to me...

 

[jbphoenix]

Voom is not dead yet!

This may look rather bad for V*, but I myself will stay Optimistic about V* until I hear a direct press release from CVC or Charles Dolan himself. I am sure that plenty of "Voom Doomers" will find this as a new opportunity to start posting their comments on this board about "the end is near" and "we told you so", but we should all stay Optimistic till we hear something official from either CVC or the Dolan's, no matter how good the source of information appears to be..

Just my $.02 worth..

 

[Tvlman]

Regarding filing address on internet:The text of the report says to file reports online to this address:

http://www.fcc.gov/e-file/ecfs.html

However, I have not been able to get to that address. Perhaps because it's busy???
Anyone??

 

[Vicki]

When I tried it, it came up saying the page has been moved here http://www.fcc.gov/cgb/ecfs/ and then redirected me. Vicki

 

[WJMorales]

31 out of 46,000 Voom customers, 6.74%. Wow, now that's really going to make Mr. Dolon the most happiest CEO in the world!

 

[jbphoenix]

31 out of 46,000 Voom customers, 6.74%. Wow, now that's really going to make Mr. Dolon the most happiest CEO in the world!

Actually, if you go to this link http://gullfoss2.fcc.gov/cgi-bin/we...hts?ws_mode=retrieve_list&id_proceeding=05-72
it shows that there has now been a total of 123 records filed for Proceeding:05-72. How many of these are in favor of E* and how many are against, I do not know.

 

[Rocker74]

31 out of 46,000 Voom customers, 6.74%. Wow, now that's really going to make Mr. Dolon the most happiest CEO in the world!

That's .0674%.

 

[Lucky]

This Satbiz.com report does not sound like very good news.

 

[socalpanman]

Actually, if you go to this link http://gullfoss2.fcc.gov/cgi-bin/we...hts?ws_mode=retrieve_list&id_proceeding=05-72
it shows that there has now been a total of 123 records filed for Proceeding:05-72. How many of these are in favor of E* and how many are against, I do not know.

There were 134 records last I looked. I randomly selected at least 5 of each group of 10 posts and all but the very first two were Voom subs in opposition.
Another important approach is to contact your congressman or any congressmen on the technology or related committees.

 

[riffjim4069]

Well, the article doesn't paint a rosy picture---and there are certainly numerous legal barriers to overcome---only those who are in the know know what they know and nobody outside the know know what they know...they can only speculate what they know because they really don't know. It's just that simple!

But seriously, while the legal issues may be challenging they can certainly be overcome and agreements reached. However, funding appears to still be an ongoing concern. It may not be, but who is to say until payments are made and assets are exchanged. Offhand, there is little doubt that C. Dolan has the funds to take ownership of VOOM...however, it would appear that he is looking for investors to help finance VOOM operationally for 12-24 months as well as finance the buy-back of Rainbow-1 from EchoStar. Perhaps some in the media are confusing C. Dolan having funds to purchase VOOM DBS assets with his attempts to secure funding for VOOM's continued operation.

Would someone in the know like to anonymously post what is taking place behind the scenes in Bethpage?

 

[mike123abc]

It looks like a few of issues are involved:

1. CVC is going to sell the satellite and Echostar does not seem to want to delay the use of the satellite. E* probably wants to get the jump on DIRECTV LIL HD, and does not want to waste time beyond the 3 month approval process.

2. Dolan does not want to pay to switch over 40,000+ subs to R-2 before he has a deal worked out with CVC. After all it could cost 8 millon to do so (assuming about $200/customer to dispatch and install), a lot of coin that could be in vain if they never reach a deal.

3. CVC and Dolan may have to negotiate a long time on this. This is not a very simple transaction and this has to be a very long complex agreement covering all sorts of contingencies where CVC feels it has nothing to lose and possible money savings by selling VOOM and Dolan gets by with paying as little as possible (normal business the seller wants all he can get and the buyer wants to pay as little as possible). It is quite possible that Dolan now sees that an agreement and transfer of control of VOOM might not occur before R-1 is handed over to E* and he would be in a real bind. Does he pay to convert before (i.e. #2 above)?

4. Does Dolan really want R-1 long term? Or does he only want it short term? If he is having trouble raising outside funding he might not want to cough up $200million in the next couple of months for R-1 when he is probably going to end up paying less than $200millon over 10 years with R-2. Even if you are worth over a billion, $200 million is not pocket change. He probably rather pay out less than $20 million a year for R-2 than paying up front.

It is quite a problem. This is probably why we have not heard much out of CVC/Dolan camps. They probably have teams of lawyers working on this, arguing out tons of details. It is also hard to come up with firm financing when the exact details have not been worked out. Even if he has enough money personally to pay for it, he probably does not want to break up CVC to pay for it. After all that would take even longer (12 - 18+ months) to find buyers and get FCC/SEC approvals for all the transactions.

We will know how confident/serious Dolan is if he agrees to pay for the R-2 dish swap out before an agreement is reached with CVC. I agree with the article that Dolan has the board votes to keep extending the time as needed to work out a deal. But, they still have the E*/R-1 deadline to deal looming.

 

[riffjim4069]

That was an outstanding summary Mike!

 

[Bruce]

It looks like a few of issues are involved:

4. Does Dolan really want R-1 long term? Or does he only want it short term? If he is having trouble raising outside funding he might not want to cough up $200million in the next couple of months for R-1 when he is probably going to end up paying less than $200millon over 10 years with R-2. Even if you are worth over a billion, $200 million is not pocket change. He probably rather pay out less than $20 million a year for R-2 than paying up front.

This is from the latest 10-K posted:

In April 2004, Rainbow DBS entered into a ten-year lease agreement for transponder space on a satellite, commencing in October 2004. Rainbow Media Holdings provided irrevocable letters of credit for $19,800,000 as a security deposit. Rainbow DBS will initially lease 13 transponders, increasing to 16 in January 2005, with the option of leasing additional transponders. The agreement contains early termination provisions whereby Rainbow DBS would be permitted on certain dates and in certain circumstances to terminate the agreement. In the event of early termination, Rainbow DBS would be required to pay an early termination penalty. In addition, Rainbow DBS would be required to make payments pursuant to the agreement up to the termination date.

The minimum future annual rentals for all operating leases during the next five years, including pole rentals from January 1, 2005 through December 31, 2009, and thereafter, at rates now in force are as follows:
2005 $ 103,906,000
2006 104,829,000
2007 98,436,000
2008 95,404,000
2009 92,769,000
Thereafter $559,223,000

It is a little more then $20 million a year to lease that bird, the security deposit alone was almost $20 million.

 

[mike123abc]

This is from the latest 10-K posted:

In April 2004, Rainbow DBS entered into a ten-year lease agreement for transponder space on a satellite, commencing in October 2004. Rainbow Media Holdings provided irrevocable letters of credit for $19,800,000 as a security deposit. Rainbow DBS will initially lease 13 transponders, increasing to 16 in January 2005, with the option of leasing additional transponders. The agreement contains early termination provisions whereby Rainbow DBS would be permitted on certain dates and in certain circumstances to terminate the agreement. In the event of early termination, Rainbow DBS would be required to pay an early termination penalty. In addition, Rainbow DBS would be required to make payments pursuant to the agreement up to the termination date.

The minimum future annual rentals for all operating leases during the next five years, including pole rentals from January 1, 2005 through December 31, 2009, and thereafter, at rates now in force are as follows:
2005 $ 103,906,000
2006 104,829,000
2007 98,436,000
2008 95,404,000
2009 92,769,000
Thereafter $559,223,000

It is a little more then $20 million a year to lease that bird, the security deposit alone was almost $20 million.

You did not read the 10-K properly. If you scroll up a couple paragraphs you would have seen:

The Company leases certain office, production, transmission, theater and event facilities under terms of leases expiring at various dates through 2027. The leases generally provide for fixed annual rentals plus certain real estate taxes and other costs. Rent expense for the years ended December 31, 2004, 2003 and 2002 amounted to $81,938, $82,187 and $76,600, respectively.

In addition, the Company rents space on utility poles for its operations. The Company's pole rental agreements are for varying terms, and management anticipates renewals as they expire. Pole rental expense for the years ended December 31, 2004, 2003 and 2002 amounted to approximately $13,607, $13,225 and $12,515, respectively.

MSG operates Radio City Music Hall under a long-term lease. Under the terms of the lease agreement, MSG is required to meet certain net worth, cash flow, and building utilization requirements. In the event MSG were to fail to meet the lease requirements and was unable to remedy such defaults, the landlord could have the option of terminating the lease.

The amount you quoted was ALL of CVC leases, not VOOM. If you look at Echostar which leases satllites from SES in a much more valuable CONUS+AK/HI slots you will see that they are paying less than $20 million a slot. Remember Dish has 2 satellites from SES this year AMC-15 and AMC-16. They have also agreed to lease one more Ku-FSS and one Ku-DBS satellite from SES.

(note reformatted so http://www.sec.gov/Archives/edgar/data/1001082/000095013405005271/d23233e10vk.htm on page 56 is the complete table)

Capital lease obligation, mortgages and other notes payable:
2005: 22,515,000
2006-2007: 39,612,000
2008-2009: 32,108,000
Thereafter: 38,506,000

 

[calypsocowboy]

A couple posts about talked about the 8 mill to swap out dishes, that is a whole heck of a lot less than the 200 mill that E bought it for so Chuck may not want to buy it back or even lease it back.