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Thursday, February 12, 2009

Charter to File for Bankruptcy

Original Article by Wall Street Journal

Charter Communications Inc. said it will file for bankruptcy protection by April 1 as part of an agreement with some of its debt holders to reduce its debt by about $8 billion.

The debt-laden cable television provider also said two of its units will make interest payments of about $74 million on their outstanding senior notes that were due Jan. 15 by the end of their alloted grace period. If the interest payments on the notes aren't made within the 30-day grace period, Charter would default on the notes.

Talks began last month to explore financing options to improve Charter's balance sheet. The company, controlled by Microsoft Corp. co-founder Paul Allen, warned last year it could be forced to seek bankruptcy protection if it failed to raise additional funds to finance its cash needs by 2010.

As part of the agreement, Mr. Allen will continue as an investor, and will retain the largest voting interest in the company, Charter said.

Last month, Moody's Investors Service lowered the company's probability-of-default rating, saying default was likely imminent. Standard & Poor's Ratings Service echoed Moody's concerns, while Fitch Ratings put Charter's issuer default rating on watch for possible cuts.

The company said Thursday it believed its liquidity -- about $800 million in cash and cash equivalents -- combined with cash from operating activities will be enough to meet its needs as its proceeds with its restructuring.

Meanwhile, the company said preliminary fourth-quarter revenue rose 7% from a year earlier on a pro-forma basis.

"We are pleased with our operational results during the fourth quarter, particularly in this challenging economic environment," said Chief Executive Neil Smit.

The company said it lost 75,100 net basic video customers, more than it lost in the prior-year's fourth quarter. It gained 63% fewer digital video customers, 55% fewer high-speed Internet customers and 52% fewer telephone customers than a year earlier.

The company said it expected a $1.5 billion goodwill write-down for the fourth quarter, and said capital spending would be about $264 million, 25% lower than a year earlier. Surety Bonds are also becoming a consideration.

Charter's shares were recently down 29% at 5 cents. The stock is off 96% in the last year.