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Cablevision brings Rainbow back into the fold

In a move to shore up its stock, Cablevision Systems Corp. will buy back
Rainbow Media Group tracking stock, effectively reabsorbing the assets it spun
off in 2001.

It remains to be seen, though, what Cablevision will do with Rainbow's
assets, which include four national cable channels -- Bravo, WE: Women's
Entertainment, The Independent Film Channel and American Movie Classics.

On Aug. 20, Cablevision plans to exchange shares of RMG
tracking stock for Cablevision NY Group stock.

The buyback comes less than two years after Cablevision separated out
Rainbow's assets (March 2001).

Since then, Rainbow's programming assets have increased in value while the
company's cable-system holdings have been deeply discounted.

Once Rainbow is back in the Cablevision fold, proceeds from sold assets could
go to pay down Cablevision's debt.

Based on 2002 estimates, a sale of Rainbow's four marquee national cable networks
could yield $1.8 billion pretax, according to Merrill Lynch & Co. media analyst
Jessica Reif Cohen.

Metro-Goldwyn-Mayer Inc. already has a 20 percent stake in those channels, for which it paid $825
million in 2001.

Last week, in a filing with the Securities and Exchange Commission, MGM said
it is "regularly evaluating business combination opportunities and other
strategic alternatives." NBC has a stake in Rainbow Media Holdings Inc.

"Although this transaction is dilutive to current CVC shareholders, we
believe this transaction is very positive to Cablevision since it is likely to
lead to a resolution of the funding gap," Reif Cohen said in a report.

A sale of Rainbow's assets is not certain, and would by no means be quick.
More likely, perhaps, is Cablevision using the cash flow from Rainbow to support
its debt and its stock. Cablevision has some debt maturities in the next year,
and the company either needs to come up with cash or a method for borrowing.

Taking back Rainbow will give Cablevision a $200 million cash infusion and
the ability to borrow on another $1 billion, according to Merrill Lynch's 2003

Cablevision stock closed down 5.87 percent Monday to $7.54 per share.

RMG stock closed down 9 percent to $9.