Cable TV Guru Puts 2 Systems in Chapter 11

Cable TV guru Paul Kagan--whose Carmel-based newsletter empire has made him the most widely quoted and respected analyst in the industry--has sought Chapter 11 bankruptcy protection for two groups of cable TV systems he owns in Northern California and the West.

Premiere Cable Two Ltd. and Mountain Side Cable Inc., two operating entities in which a Kagan investment fund is the general partner, filed for Chapter 11 in Denver federal bankruptcy court.

The two companies, which serve about 14,000 subscribers, listed $17.5 million in liabilities and $16 million in assets in the Aug. 30 filing.

In an interview Wednesday, Kagan said his investment fund was a limited partner in a group that acquired the cable systems in 1987 and 1988. Subsequently, Kagan said, he bought out the general partners and put in new management and capital to run the systems.

“As with many deals done in 1987 and 1988, we didn’t anticipate an environment in which you could not refinance,” Kagan said. “Admittedly, this was a leveraged deal, and when the cash flows don’t measure up, you have to restructure.”

Kagan said the bankruptcy filing was forced by two of the cable systems’ subordinated debt holders, who could not agree on refinancing terms. He said the cable systems are now paying their bills and the interest on their senior debt.

Kagan is considered a leading financial analyst of the cable TV industry, and his newsletters are closely followed by Wall Street and senior executives. Over the years, he has developed a reputation as being extremely bullish on the industry and a believer that cable TV values will only continue to rise.

“If there was any real mistake, (Kagan) paid too much,” said J. Patrick Michaels Jr., chairman of Communications Equity Associates, a Tampa, Fla.-based investment banking firm specializing in cable TV transactions. “But everybody paid too much in those days.”

Last January, Kagan sold back KTIP-AM and KIOO-FM in Porterville, Calif., for $91,000 and the forgiveness of about $1 million in debt to Oakland A’s baseball announcer Monte Moore. Kagan had bought the stations in 1988 for $1,040,000.

In addition, Kagan this spring sold KHIT-AM and KIIQ-FM in Reno for $1 million. He had bought the stations for $2.5 million.

Kagan said he did not believe that the bankruptcy filing would harm his credibility with investors or Wall Street.

“I don’t think you can expect that all investments work out,” he said. “And rather than negatively impact my knowledge of the cable TV industry, it will actually increase it. You get to learn a lot from the (deals) that don’t work out.”