02.19.2009 03:30 PM
Charter Intends to File for Bankruptcy

(Feb. 16, 2009) ST. LOUIS, MO.: Charter Communications intends to file for pre-arranged Chapter 11 bankruptcy by April 1. The cable operator last week said it reached an agreement with various creditors who will be given stock or warrants in return for forgiving $8 billion of Charter’s $21 billion debt.

All shareholders save those holding common stock will be remunerated under the pact. Paul Allen, co-founder of Microsoft and Charter’s lead investor, will continue to retain a 35 percent voting interest in the company, though his 51 percent equity stake will be eliminated. Common shares, trading for around 2 cents at Friday’s close, will be cancelled. The company intends to apply for a post-bankruptcy NASDAQ listing to raise $3 billion in new capital and through refinancing.

As of Feb. 11, Charter had $800 million in cash and equivalents, enough with cash from operations to keep the company going, it said. Charter (NASDAQ: CHTR) is the fourth largest cable TV operation in the country with more than 5.5 million subscribers in 27 states. It ranks behind Comcast, Time Warner Cable and Cox.

In preliminary 4Q and 2008 results, Charter reported negative cash flow of $273 million on actual revenues of nearly $1.66 billion for the fourth quarter of 2008. Earnings before interest, taxes, depreciation and amortization are expected to come in at $620 million, up nearly 10 percent from the year-earlier period. The EBITDA figure excludes a $1.5 billion impairment charge related to cable franchises the company expects to take during the quarter. For the full year, free cash flow was negative at $842 million on revenues of nearly $6.48 billion, up nearly 8 percent from 2007. EBITDA is projected at more than $2.3 billion.

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