SEC documents outline Cablevision-Newsday deal

BY JAMES T. MADORE AND MARK HARRINGTON | james.madore@newsday.com
mark.harrington@newsday.com

8:10 PM EDT, May 15, 2008

The new partnership formed from the sale of Newsday to Cablevision Systems Corp. will be responsible for $650 million in debt used to fund the transaction, and if a default occurs, some of the venture's assets could be sold, according to a securities filing yesterday.

In documents filed with the U.S. Securities and Exchange Commission, Newsday's owner, Tribune Co., said the partnership, called Newsday Llc, would borrow $650 million using money from Cablevision bonds underwritten by Bank of America. This debt will be guaranteed by Cablevision "and secured by a lien on the assets of Newsday Llc."

Tribune can require Bethpage-based Cablevision to purchase Tribune's 3 percent stake in the venture after 13 years. Tribune retains ownership of Newsday's Melville headquarters and other property.

Newsday Llc will be governed by a board of five directors, four of whom will be named by Cablevision, the fifth by Tribune. The venture agreement stipulates that Tribune's director is subject to Cablevision approval.

The pact contemplates the possibility that Newsday's facilities may be acquired by the venture although terms were not disclosed. Early reports of Cablevision's interest in Newsday suggested its bid included real estate. Cablevision will prepay $18 million in rent for an undetermined period.

Asked about stipulations in the sales agreement, Sammy Papert III, chief executive of newspaper consultants Belden Associates in Dallas, said, "None of that sounds so out of the box to raise any flags in my mind. ... Nothing in that strikes me as odd."

Officials at Cablevision and Tribune declined to elaborate on the filing, saying the documents speak for themselves.

Echoing Cablevision chief executive James Dolan's statement earlier this week that he did not anticipate layoffs -- though he did not rule them out -- the filing said the company "does not anticipate that there will be any 'employment losses'" as a result of the deal that would trigger a federal requirement to notify workers of cuts.

Dennis Grabhorn, president of Graphic Communications Conference Local 406, which represents Newsday editorial, print shop and delivery workers, said his reading of the filing was that "they're going to honor our contract," which extends to 2010. He said he hasn't met with Cablevision officials.

The pact also restricts Tribune from competing against Newsday operations for three years after the closing date of the sale, the filing said. Tribune, for instance, cannot launch a newspaper or other business "engaged in the publication or dissemination of information, news and events" in the New York market, with certain allowances for Web sites already planned or part of the company's network of Web sites. Tribune also is restricted from hiring Newsday employees for three years.

As expected, Cablevision has agreed to pay any taxes that Tribune would owe should Newsday and its subsidiaries be sold before Jan. 1, 2018. This was a key provision for Tribune chief executive Sam Zell, who wanted to avoid capital gains tax from any sale.

Last year, he took Tribune private in a deal involving an employee stock ownership plan, which reduces the company's tax bill if it remains intact for 10 years. But declining newspaper revenue led him to sell Newsday to raise money for debt payments.

Either Cablevision or Tribune could terminate the deal if it is not finalized by Dec. 31.