Charter files Chapter 11


Paul Allen’s Charter Communications headed to a federal bankruptcy court Friday to file the prepackaged Chapter 11 restructuring agreed to last month by its major creditors. The company says it has filed motions to continue normal business operations – including payments to employees and vendors – and that it has enough cash on hand that it won’t require any debtor-in-possession financing. The restructuring will reduce Charter’s debt load by $8 billion to around $13 billion.

Friday’s announcement filled in some of the details of where the agreed-to $3 billion in investments by Charter’s bondholders will come from. The Bondholder Committee has committed to up to $2 billion in equity proceeds, $1.2 billion in roll-over debt and $267 million in new debt to support the overall refinancing. Once that’s done, Charter says it expects to generate positive cash flow, due to significant reductions in its interest expenses. 

“The financial restructuring is good news for Charter and our customers and, if approved, will result in Charter being better positioned to deliver the products and services our customers demand now and in the future,” said Neil Smit, President and CEO.

Micrsoft co-founder Paul Allen will still be the company’s largest shareholder, but his majority 51% voting stake will be reduced to 35%.

The company has named Gregory L. Doody as its Chief Restructuring Officer. He has plenty of experience in the field, including work on restructurings of Calpine Corporation and HealthSouth. 

RBR/TVBR observation: You can look at it as a rash of media bankruptcy filings, but so far it’s been only companies that everyone knew were on weak financial footing. Like Charter, Tribune Company, Equity Media, Young Broadcasting, Journal Register, Minneapolis Star Tribune and Philadelphia Newspapers Inc. were all heavily leveraged and suffering under their debt loads even before the worst of this downturn. Bankers really don’t want to own television and radio stations, cable systems or, worse yet, newspapers, so while covenant compliance is a big issue this year, most loans will be restructured so media companies can continue operating. Once again, we invite you to read the extensive discussion of this issue in the 4th Annual RBR/TVBR Financial Roundtable or hear it from the Media Center on our homepage.