No Pot Of Gold At End Of This Rainbow

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Sep 8, 2003
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No Pot Of Gold At End Of This Rainbow

BYLINE: Joy Ferguson

BODY:


Investors were less than positive over the new deal from Rainbow National Services (RNS) last week. The satellite-television business, a new spinoff from Cablevision Systems, planned to sell $800 million of debt, including $250 million of senior notes due 2012, and $550 million of senior subordinated notes due 2014. Banc of America Securities, Bear Stearns Credit Suisse First Boston and JP Morgan managed the private offering.

The proceeds of the bond deal, together with borrowings under a new $950 million senior secured credit facility, will be used as a distribution to parent company, Rainbow Media Enterprises, which will then distribute approximately $725 million to Rainbow Media Holdings to repay all existing borrowings under its $821 million credit facility. Additionally, Rainbow Media Enterprises will use the remaining proceeds to invest in its subsidiaries, primarily Rainbow DBS and its Voom satellite service, the first service to offer a comprehensive array of high-definition (HD) television programming.

But investors expressed concern that any of the proceeds would end up at Voom, which many consider a highly speculative, development-stage satellite venture, and Cablevision itself is spinning off its unprofitable Voom subsidiary. In Cablevision's recent second quarter earnings report, the company announced that Voom lost $81.5 million, producing revenue of just $2.7 million out of $1.2 billion total company revenue while contributing to a large part of Cablevision's $187 million net loss.

Voom, said Russ Solomon, analyst at Moody's Investor Service, has been a highly speculative venture for Cablevision, demanding a lot of capital and acting as a drain on the company's financial performance. "The market is not thrilled with that," he said.

As a result, many investors steered clear of the Rainbow National deal. "It's easy to be negative on the credit," said one high yield investor, "given that [Rainbow Media] is taking a lot of the money and putting it toward the satellite business." The three cable networks that Rainbow National controls, which include AMC, Women's Entertainment and International Film Channel, don't need a lot of capital, he said, so the money is "just being passed on to the satellite subsidiary." He also said that the three networks are mediocre and not a big source of revenue. "RNS is a new company coming out of Cablevision; it's unclear how the numbers will be on a quarter-upon-quarter basis," he said.

Another investor said he would not look at the deal given the recent spate of deals from other, more preferable names in the industry, including the higher-rated PanAmSat. "In the long term, uncertainty is still there in the cable and satellite industry as far as how things will play out. I'd rather stick with a higher quality capital structure and a larger, more established company," he said. Investors also considered EchoStar preferable to RNS. EchoStar just released a quarterly report last Monday that indicated strong revenue growth and evidence of an increasing number of subscribers taken from cable television.

A Standard & Poor's analyst said investors' concerns are justified. Rainbow Media, which has a limited subscriber base, is in direct competition with EchoStar and DirecTV. And while the company may offer a specialized high-definition service, the question is whether it will be able to compete at the consumer level with the other choices available. S&P has assigned a triple-C-plus to the senior subordinated notes of RNS.

Likewise, Moody's rated the senior unsecured notes B3 and the senior subordinated notes Caa1. "There is a lot of uncertainty with the credit," said Christina Padgett, analyst at Moody's, who noted concerns over how much it will cost Rainbow National to fund these other businesses or how much money it will take before Voom's business improves. In addition, Rainbow National is almost fully dependent on AMC among its assets, which also makes the company relatively risky.

http://www.thomsonmedia.com http://www.highyieldreport.com

LOAD-DATE: August 16, 2004
 
More reason to stick with Voom all investors consider HDTV as very "high risk" that's high risk not "high demand".
 
you can SELL your debt? how do you do rhat?

psst, I've got some debt right here. grade A, top sh**. want some?
 
I was at Best Buy getting some speaker wire and ran into a friend that installs data and communication systems in high end homes(1m and above)his brother who is a installer out of MD for VOOM,D*,E*did 11 installs in july,he has taken back the equipement back on 7 of the VOOM installs and replaced it with either D*,E*(not sure how that breaks down)He said it was about 50-50 on PQ and no OTA or very little of it.
Told him that I was having a problem trying to get an install from one of the VOOM locals(never get calls back) for the past 6 weeks and wondered if he could move the ball some.Seems that the installers have their hands tied everything has to go through VOOM then to Installs Inc then to local installer.This doesn't cut the mustard,when I went HD two weeks before Superbowl,I went out bought a 46" Sony,triple lnb dish(to replace the dual)HD receiver,power cleaner,cables and the rest of the crap and was up and rinning 3 1/2 hours after I got home(probably saved 1 hour by already having a old dish aimed in the general position-installed that before)lack of self installs poor CSR(Home Theather mag signed up for all three services,when they had a problem with VOOM's OTA they had to leave a message and there was no call back for 5 days and 2 weeks before anything was done)and poor OTA/or none will hurt them,if not wipe them out completly.I should be able to call,give a credit card #(for possible non payment of equipement)have them send me the equipement for a self install,if I can't get it right(i highly doubt)then I get signed up for a pro install at their convenience,hell I'd even pay
 
On the install side of things, no one has to go direct with VOOM which has Installs Inc as their installation arm. You can go through a local dealer which can be found through the store locator on VOOM's website, or let me know where you live and I will point you in the right direction. True, pure installers can only move as fast as the systems lets them, authorized dealers can usually act much quicker on installation and any service calls.

Thanks,
 
Well did like you said,had seen the local dist page once before,and got the number of a installer about 3 miles away.Decided to drive up and talk to them,the shop is empty,called the number and got through to someone.Thats where the crap starts again----asked if they installed VOOM systems and he said it was ZOOM ---I told him I belive that they are called VOOM he said oh-yeah.Wanted to know if you had to purchase the equipement form them or if it was the same as VOOM's offer to lease the equipement,he said that you lease it form them(which you don't)I told him my understanding is that you lease it form VOOM they just do the install and are paid for that.He then states that he doesn't know much about VOOM,D*,E* and the best action is to call back in two weeks when the guy that knows about these systems is there
He doesn't even want my number for a possible follow-up,or set up a date to possibily see if the install is possible(which I know can be done)VOOM has got to get more control of these fly by nights it really makes them look non-professional,and not serious.Well one step forward and 4 backwards
 
VMI said:
On the install side of things, no one has to go direct with VOOM which has Installs Inc as their installation arm. You can go through a local dealer which can be found through the store locator on VOOM's website, or let me know where you live and I will point you in the right direction. True, pure installers can only move as fast as the systems lets them, authorized dealers can usually act much quicker on installation and any service calls.

Thanks,
VMI: I live in Knoxville,TN and would like to know who does installs here. I will be switching to VOOM in Dec. when my contract with Dish is up. :)
 

Sunday Ticket on Voom?

If you like PQ it might be time to leave Directv

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