You can add Paul Allen’s Charter Communications to the list of media companies heading to bankruptcy court. The cable MSO says it has reached an agreement in principle with an ad hoc committee of its creditors which will require it to file for Chapter 11 bankruptcy restructuring by April 1st. But even after reducing debt by $8 billion, Charter won’t be anywhere near debt-free.
Charter’s financial stress has been well known for some time. Even so, investors were stunned yesterday as the company confirmed that it would file a pre-packaged Chapter 11 petition as part of its debt restructuring. Under the terms, the company’s common shares will be cancelled and current shareholders will receive nothing.
Company founder Paul Allen, a co-founder of Microsoft, has agreed to remain as an investor and will have the largest voting stake in the reconstituted company. Refinancing and new capital will total $3 billion and the proposed agreement will reduce Charter’s $21 billion debt load by $8 billion.
In the meantime, the company says it has $800 million in cash on hand. $74 million in interest payments on senior notes that had been due January 15th will be paid before the 30-day grace period expires.
Charter reported that Q4 revenues were up 7% to $1.65 billion and pro forma EBITDA gained 10% to $619 million.