Charter Communications Inc. on Friday filed for a prearranged Chapter 11 bankruptcy to get relief from its creditors, as the nation’s fourth-largest cable operator strives to keep its head above water and still compete with phone companies and satellite TV providers.
Charter, which serves 150,000 customers in 59 municipalities in the Fort Worth area, said last month that the upcoming filing would not affect its service. It reported having about 350 employees in the Fort Worth area.
The filing restructures about $8 billion of debt at St. Louis-based Charter, which is controlled by Microsoft co-founder Paul Allen, but leaves about $13 billion of debt on its books. Allen will control 35 percent of the votes in the reorganized company.
Charter made its filing with the agreement of 52 percent of bondholders. The rest of the debtors will be dealt with through bankruptcy court. The cable operator racked up massive amounts of debt as it grew through acquiring cable systems.
For years the company has ducked insolvency, but it is now coming up against tight credit and billions of dollars of debt coming due.
While the bankruptcy provides relief, it remains to be seen whether Charter can finally post a profit with a smaller debt load during a recession.
"That’s the question," said Matt Dundon, an analyst at Miller Tabak Roberts. "It really depends on what your expectations are of the development of cash flow in the business."
Charter’s troubles also make it more vulnerable to competition, which could target the cable operator’s 5.5 million subscribers in 27 states.
Charter had about $21.7 billion in debt at the end of 2008. Holders of $8 billion of the debt agreed to exchange it for almost full ownership in the new company, and some old debt was exchanged for new debt. After the bankruptcy, the company will have $13 billion mainly in bank debt, which expires from 2013 to 2016.
Bondholders agreed to invest over $3 billion in the company, including up to $2 billion in equity, $1.2 billion in debt to be rolled over and $267 million in new debt.
In a statement, Neil Smit, the company’s CEO and president, said the restructuring "is good news" for the company and its customers.
"We look forward to an expeditious restructuring, and once completed, we believe that Charter will be a stronger company," Smit said.
Charter said that along with the bankruptcy filing it filed motions requesting permission to keep employee wage and benefits programs running and to continue customer programs without interruptions.
The company also named Gregory L. Doody as Chief Restructuring Officer. Doody has worked on restructurings for companies including Calpine Corp. and HealthSouth Corp.
Kirkland & Ellis LLP is serving as Charter’s legal counsel, Lazard as its financial adviser and AlixPartners LLP as restructuring advisor.
Charter Communications Inc. on Friday filed for a
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