Paul Allen's cable firm files for Chapter 11
Indebted to debtors
Charter Communications Inc, which is controlled by Microsoft cofounder Paul Allen, will file for Chapter 11 bankruptcy protection by 1 April after striking a deal with senior debt holders yesterday.
The US cable firm said in a statement that it had reached an agreement with some of its creditors to help it reduce its debt by $8bn. Since 30 September 2008 Charter has been saddled with a debt load of around $21bn.
As part of that deal shareholders have been frozen out and will receive nothing, while debt holders and bondholders can expect a mix of new notes, equity and cash depending on how high up they rank on the firm’s list, said Charter.
“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 Charter president and CEO Neil Smit.
“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,” he said.
The company plans to make an overdue interest payment of $74m before a final deadline of 15 February.
Charter, said that as of 11 February it had more than $800m in cash on its balance sheet, also offered its outlook for the fourth quarter.
It expects to see pre-tax earnings to grow to 9.7 per cent to $620m and predicts revenue to climb seven per cent to $1.656bn. Charter will also record an impairment charge of $1.5bn for the quarter ended 31 December 2008.
The firm said it expected to be around 50,000 subscribers lighter, after 75,100 people dumped its basic video service. It was only slightly offset by signing up 22,300 net digital subscribers for the Q4 period. ®