Charter, the Junk Bond Champ, Goes Bankrupt

Charter Communiciations, which issued more junk debt in the past decade than any other U.S. company, finally collapses.
Tim ReasonFebruary 12, 2009

Charter Communications, the cable giant controlled by Microsoft Corp. co-founder Paul Allen, succumbed to the weight of its enormous debt load, announcing today that it will said it will file for Chapter 11 by April 1 as part of an agreement with its creditors.

The company, which Allen bought in 1998, has sold more junk bonds than any other U.S. company in the past 10 years, according to Bloomberg. dubbed Charter “The Great Junk Hope” as early as 2001, when the company purchased a handful of cable systems from AT&T.

Charter lost about $1.6 billion in 2007 and nearly another $1 billion in the first three quarters of 2008. As of February 11, Charter had about $800 million in cash and cash equivalents.

Under the agreement with an ad hoc committee of the company’s debt holders, the company will reduce its debt by about $8 billion.

As part of the deal, two of its subsidiaries — CCH I Holdings, LLC and Charter Communications Holdings, LLC — will make about $74 million in interest payments on senior notes that were due January 15.

“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 CEO Neil Smit.

Charter said it 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.

“The purpose of Charter’s financial restructuring is to strengthen its balance sheet in order to fully support the Company’s operations and service its debt,” the company said in its announcement. “As such, the agreement-in-principle contemplates paying trade creditors in full.”