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Charter Emerges From Chapter 11 Bankruptcy Protection

By: Mike Farrell, Multichannel News

Charter Communications said Monday that it has completed its restructuring and has emerged from bankruptcy protection, ending an eight-month process.
Charter filed for bankruptcy protection on March 27, reaching agreement with the majority of its bondholders on a plan that would shave $8 billion in debt from the company's books and pump about $3 billion of new equity into the company.

In a statement, Charter said that it has successfully emerged from bankruptcy and that it would issue a new stock no earlier than 45 days after emergence. That would put the earliest date for a new stock offering sometime after Jan. 14.

"This successful financial restructuring is a significant accomplishment and makes Charter a stronger company for the benefit of our customers, vendors, employees and the communities we serve," said Charter CEO Neil Smit in a prepared statement. "We have restructured our balance sheet without losing sight of serving our customers and maintaining our business relationships. Charter will remain focused on further enhancing the customer experience and is positioned to generate free cash flow. On behalf of the management team, I would like to thank the more than 16,000 Charter employees across the country for their hard work and dedication throughout this process."

Charter has said that it is positioned to generate positive free cash flow through the reduction of more than $830 million in annual interest expense. Charter's outstanding debt now stands at about $13.5 billion, or around 5.4 times projected 2009 cash flow, in line with its publicly traded MSO peers.

While details on the new stock are few, Charter offered a peek into its plans last week in a filing with the Securities and Exchange Commission, where it appeared to set a maximum proposed price for the shares of $19.37 each.
In an SEC filing Nov. 25 for a new employee stock ownership plan, Charter said that it is authorized to issue as many as 1.17 billion shares in total, including 900 million shares of Class A common stock, 25 million shares of Class B super-voting stock and 250 million shares of preferred stock. In the filing, Charter proposed setting aside about 3.8 million shares of Class A common stock with a maximum offering price of $19.37 per share for employees.

That would be around the price that Charter stock originally traded when it went public in November 1999. Charter's initial public offering was priced at $19 per share, opened at $21.50 per share and the stock climbed as high as $26.31 each in its first week of trading. The stock had fallen on hard times since - it's peak in the last five years was $5.69 per share - and it had traded under $1 each in the months leading to Charter's bankruptcy filing on March 27.
Charter received approval for its reorganization plan - which would reduce its debt by $8 billion and pump $3 billion of new equity into the company - on Nov. 17. Also last week, a group of lenders and bondholders who had tried to block approval of the plan were rejected in their request for a stay of that approval while they filed an appeal. U.S. District Court Judge Sidney Stein rejected the motion for a stay, stating that the lenders hadn't shown the necessary possibility of success on appeal, according to a Bloomberg News report.


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