Paul Allen's Charter files for bankruptcy protection
14 Feb 2009
Charter Communications Inc will file for bankruptcy protection under Chapter 11 by April 1 as part of an agreement with some of its debt holders to reduce its debt by about $8 billion.
Charter said in a statement on Thursday that it had reached an agreement with a committee of some debt holders to reduce its obligations. Controlled by Microsoft Corp co-founder Paul Allen and based in St Louis, Charter has about 5.6 million customers in 28 states.
The debt-laden cable television provider also said two of its units will make interest payments of about $74 million on their outstanding senior notes that were due 15 January by the end of their allotted grace period. If the interest payments on the notes aren't made within the 30-day grace period, Charter would default on the notes.
Talks began last month to explore financing options to improve Charter's balance sheet. The company warned last year it could be forced to seek bankruptcy protection if it failed to raise additional funds to finance its cash needs by 2010.
Last month, Moody's Investors Service lowered the company's probability-of-default rating, saying default was likely imminent. Standard & Poor's Ratings Service echoed Moody's concerns, while Fitch Ratings put Charter's issuer default rating on watch for possible cuts.
On Thursday, the company said it believed its liquidity - about $800 million in cash and cash equivalents - combined with cash from operating activities will be enough to meet its needs as its proceeds with its restructuring.
The cable company has sold the most US high-yield bonds of any company in the past decade, according to data compiled by Bloomberg. Allen bought Charter in 1998, and amassed the company's debt burden while building it into the fourth-largest US cable provider. Charter, which has reported losses every year since going public in 1999, added telephone, digital-TV and Internet services to compete with larger rivals and fiber-optic networks.
The company said preliminary fourth-quarter revenue rose seven per cent from a year earlier on a pro forma basis. "We are pleased with our operational results during the fourth quarter, particularly in this challenging economic environment," said chief executive Neil Smit.
It said it lost 75,100 net basic video customers, more than it lost in the prior-year's fourth quarter. It gained 63 per cent fewer digital video customers, 55 per cent fewer high-speed internet customers and 52 per cent fewer telephone customers than a year earlier.
The company said it expected a $1.5 billion goodwill write-down for the fourth quarter, adding that capital spending would be about $264 million, 25 per cent lower than a year earlier.
In December, Charter started talks with bondholders on "financial alternatives", including restructuring. Through the first three quarters of 2008, Charter lost almost $1 billion.
Last week, Charter said it hired Greg Doody, the lawyer who helped Calpine Corp emerge from bankruptcy.
