UPDATE 2-Cablevision expects charges for Newsday newspaper

(Adds analyst comment, debt offering, share move)

NEW YORK, Feb 9 (Reuters) - Cablevision Systems Corp CVC.N said it will take a charge of up to $450 million related to its acquisition of New York newspaper Newsday last May, blaming the dramatic deterioration of the publishing business.

Investors and analysts questioned the New York cable operator’s $650 million acquisition of Newsday and other smaller papers last year, noting that newspaper sector was suffering from declining readership and anemic advertising.

In a regulatory filing on Monday, Cablevision said it plans to record pre-tax charges of $375 million to $450 million in its 2008 financial statements.

“Charges reflect the continuing deterioration of values in the newspaper industry and the greater than anticipated economic downturn and its current and anticipated impact on the newspaper publishing group’s advertising business,” Cablevision said.

Cablevision has not yet given a date when it will file its fourth quarter earnings statements.

Publishers have written down the value of their assets as advertising revenues, long their primary source of income, declines. Last week News Corp NWSA.O wrote down half the value of its $5.6 billion acquisition of Wall Street Journal parent Dow Jones & Co.

The centerpiece of Cablevision’s publishing group is Newsday, a Pulitzer Prize winning newspaper centered on Long Island. The group also includes amNewYork, a free newspaper, and Star Community Publishing, a network of shopper publications.

“Wall Street panned this (Cablevision/Newsday) deal from the day it was announced,” said Craig Moffett, analyst at Sanford Bernstein. “It’s no surprise to anyone that these papers are worth a lot less than they paid.”


Cablevision also said on Monday it plans to offer $500 million of senior notes to institutional investors. It plans to use the net proceeds from the offering to address upcoming debt maturities.

The junk bonds are expected to yield about 9.25 percent to 9.5 percent, according to International Financial Review, a Thomson Reuters-owned publication. The 10-year senior notes are excepted to be priced with a discount of about 4 to 5 percentages points.

Moffett said it was a “positive sign” that the markets were still willing to lend to Cablevision and reflective of the strong cash flow of the business and the cable sector in general.

Last month Cablevision sold about $750 million of 3.25-year notes yielding 11.375 percent.

Cablevision serves more than 3 million cable television subscribers in the New York area and also owns cable networks like AMC and Sundance as well as sport teams like New York Knicks basketball team and venues like Madison Square Garden.

Shares were up 9 cents at $15.22 in midday trading on the New York Stock Exchange. (Reporting by Yinka Adegoke and Paul Thomasch; Editing by Derek Caney)