Cable Technology Feature Article
February 12, 2009
Paul Allen's Charter Communications to File for Bankruptcy
By Michael Dinan, TMCnet Editor
Eyeing a plan to reduce its debt by $8 billion, the nation’s third-largest public cable operator announced today that it would file for bankruptcy.
Officials at St. Louis-based Charter Communications, Inc. said they would file for Chapter 11 before April 1.
“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,” company officials say. “As such, the agreement-in-principle contemplates paying trade creditors in full.”
The Fortune 500 company – which is controlled by Microsoft (News - Alert) co-founder Paul Allen (pictured below) and serves about 5.5 million customers in 27 states – also today released what appeared to be a partial fourth-quarter earnings statement. The statement did not include a report of net income, and appeared to report just one negative in the three-month period ended Dec. 31: the company lost 75,100 basic video customers.
The company has about $800 million in cash, officials say. Depending on their seniority, bond and debt holders will receive new notes, cash and equity. Shareholders will not receive anything for common stock, which will be canceled.
Charter President and Chief Executive Officer Neil Smit said the company was “pleased to have reached an agreement with such a significant portion of our bondholders on a long-term solution to improve our capital structure.”
“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,” Smit said. “Moreover, the interest and support provided by our stakeholders with their new capital investment underscores their confidence in Charter and our business.”
It isn’t clear what kinds of layoffs or changes in services, if any, the company’s restructuring will include.
Charter – which two weeks ago launched what it called fastest residential service available from any multiple system cable and telecom provider., as TMCnet reported – said it expects revenues for the fourth quarter of $1.653 billion.
Given the recession, Smit said that he was “pleased” with the results.
“We are continuously expanding our high-definition offering, we’ve recently launched 60Mbps high-speed Internet service, and later this month we’ll upgrade Charter High-Speed Internet Max from 16 Mbps speed to 20 Mbps,” Smit said. “Our operational results continue to reflect the underlying potential of our business, and our talented employees remain focused on offering enhanced products and service for our customers.”
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Michael Dinan is a contributing editor for TMCnet, covering news in the IP communications, call center and customer relationship management industries. To read more of Michael's articles, please visit his columnist page.
Edited by Michael Dinan