Services To Continue—

Charter Communications

To File Bankruptcy April 1

By John Voket

Struggling Charter Communications Inc, the nation’s fourth largest cable operator, confirmed widespread suspicions February 12 that it plans to file a prearranged Chapter 11 bankruptcy by April 1.

Charter, which is controlled by Microsoft Corp co-founder Paul Allen, said it has reached an agreement in principle with holders of $8 billion in debt who will give up repayment of their debt, the Associated Press reported. In return, they will receive common shares, or warrants for rights to get common shares, that translate to nearly owning the entire company after bankruptcy.

Mr Allen will remain as an investor and retain the largest voting interest in Charter. While his 51 percent stake in the company will be wiped out, along with those of other shareholders as the stock is canceled, Mr Allen was given voting control by debt holders.

He also holds some debt, which will be converted, and preferred stock.

In a February 12 release posted on Charter’s corporate website, a company official is quoted as saying the reorganization will have no apparent impact on its subscribers. Neil Smit, president and chief executive officer, suggests the bankruptcy may actually improve consumer offerings and service in the future.

“We are pleased to have reached an agreement with such a significant portion of our bondholders on a long-term solution to improve our capital structure,” said Mr Smit in the release. “We are committed to continuing to provide our 5.5 million customers with quality cable, Internet and phone service, and through this agreement, we will be even better positioned to deliver the products and services our customers demand now and in the future.

“Moreover, the interest and support provided by our stakeholders with their new capital investment underscores their confidence in Charter and our business,” Mr Smit concluded.

The release goes on to state that Charter’s operations are strong, and the company remains focused on continuing to provide its customers with quality service and support today and going forward.

As of February 11, Charter had approximately $800 million in cash and cash equivalents available to it. Charter believes its liquidity, combined with its cash from operating activities, will be sufficient to meet its projected cash needs, including the payment of normal operating costs and expenses, as it proceeds with its financial restructuring.

In its prepackaged bankruptcy, each creditor has voted on the plan before the filing. Charter said it plans to pay what it owes to suppliers and other trade creditors in full and go about the normal course of business.

In January, two Charter subsidiaries did not make scheduled interest payments worth $73.7 million on some of its debt. The firm had until a payment grace period ran out Sunday, February 15, to make the interest payments.

According to recent reports, the St Louis-based firm has long been the most indebted major cable firm, with net debt of slightly more than $21 billion as of September 30.