Whoever thought we'd see banks playing the hero?
Monday, they did. If you'll recall my mini-rant of two months ago, Cablevision (NYSE:CVC), cable fiefdom of the Dolan clan, had just come off of a boardroom defeat, when the company's board refused the Dolans' offer to take private the company's most profitable units for $21 per share, and spin off the leftover lukewarm part of Cablevision to the firm's current shareholders.
The disagreement between the board and the CEO didn't seem to engender any animosity, however. Both sides described it more as a failure to agree on a mutually acceptable price, followed by the Dolan family withdrawing their offer . and making a counteroffer. Instead of splitting up the company and carting off the cash machines, the Dolans argued that Cablevision should take on $2.8 billion in additional debt, bringing its total debt load close to $13 billion. The reason: The firm should issue a $3 billion (that it didn't have) dividend to its shareholders, of which $700 million would go straight into the Dolans' pockets.
The logic of taking on a heaping helping of debt in order to give the cash away escaped this Fool. But it seemed the board was actually willing to go along with the plan until Monday. That's when the news broke that Cablevision had discovered its existing loan agreements forbade its taking on the kind of debt it'd need to absorb to give all that cash to the shareholders.
That's right, folks. In today's episode, we saw Cablevision's banks playing the role of Dudley Do-Right. The heroic Mountie rode in and, foiling Snidely Dolan-Lash's dastardly plan, untied Cablevision from the tracks before the fair damsel could be crushed by the approaching trainload of debt.
So Cablevision is safe for now. But perhaps not for long. In a filing with the Securities and Exchange Commission Monday morning, Cablevision not only admitted its defeat, but termed it only temporary. Without being specific, the firm characterized its loan agreement breaches as "technical covenant violations" and promised to seek waivers from its banks that will permit it to move forward with both the dividend and the debt.
Snidely's been foiled today. But tune in next week -- same Mountie time, same Mountie channel -- to see if Dudley Do-Right will succumb to the trickster's wiles.
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Fool contributor Rich Smith does not own shares of any company named above.
