SBJ/20100726/This Week's News

$450M SNY loan includes investor dividend

SportsNet New York, the New York Mets-controlled regional sports network, is borrowing $450 million, more than half of which will flow to the channel’s investors as dividends, sources said.

SNY counts Comcast and Time Warner Cable as investors along with the Mets. The RSN held a bank meeting July 15 at its studios on Sixth Avenue in Manhattan and hopes to syndicate the deal on Thursday, the sources said. The network’s cash flow is about $100 million, said one source who had seen the financial documents. That amount is about 60 percent of the cash flow of rival YES Network.

The Mets, Comcast and Time
Warner Cable are among the
investors in the network.

SNY declined to comment, as did co-lead banker Bank of America. The other co-lead banker, JPMorgan Chase, did not immediately respond for comment.

SNY launched in 2006 with Comcast and Time Warner as minority partners, sidestepping the distribution issues YES and the New York Yankees encountered in that network’s first years. SNY borrowed $200 million in 2007, largely to pay back startup costs fronted by the investors and the Mets, the sources said. That debt is being refinanced as part of the larger transaction. Of the remaining $250 million, $239 million will go out in dividends; the reminder is for fees, the sources said.

It is fairly common for cable channels to borrow money and use proceeds as dividends. YES Network has done so on several occasions at larger multiples than the pending SNY transaction.

“This type of financing … is usually a very high quality credit because of the subscriber fees that underlay it,” said sports consultant Marc Ganis, who has advised the Yankees but was speaking here as a third party. “It is the means by which equity value can be distributed in an RSN to its owners when the team is one of the owners.”

The distribution to the Mets might stoke further speculation that the team is in need of funds after the club’s owner, Fred Wilpon, lost substantial sums in the Bernie Madoff investment scandal, but it is not uncommon for a core team to lose money but see profits generated by its RSN. The Yankees, for example, lose money as an individual franchise but more than make up for it through YES, which in 2008 executed a more than $1 billion financing.

A financial source said the SNY deal should have little trouble closing and would pay an interest rate of 350 interest points over the London Interbank Offered Rate, a floating rate index that last week was trading at 0.51 percent. That would mean if the loan were active late last week, it would carry a rate of 4.01 percent.

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