Does Charter Have a Chance?

February 2nd, 2009 by · 1 Comment

Charter Communications (NASDAQ:CHTR, news, filings), the fourth largest cable company in the US, is looking more and more like the next casualty of the recession.  The company has long been burdened by a debt load of over $20B, and has teetered on the precipice before yet through perseverance, creativity, and some very favorable credit markets has survived.  This time, however, they seem to have dramatically fewer options.  The credit crisis makes it increasingly difficult to see how they can pay the $1.9B in principle that comes due in 19 months.

With A few weeks ago, the company missed interest payments of $73.7M.  Of course, they could have paid that interest, and they could have paid it for several more quarters at least.  But like Nortel last month, they seem to be signaling a preference for a softer landing now to a harder one later and are trying to negotiate some sort of deal with their bondholders.

There's still a chance of course, the story doesn't have to end in bankruptcy court.  But any other solution surely involves substantial dilution, probably via a major debt for equity swap.  Of course, the company has always had deep pockets to draw on, and they could step up to the plate one more time.  But Is Paul Allen or anyone else really ready to sink more money into Charter at this point?  After all, we're talking about some $10B coming due over the next four years, it's not chump change.

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Categories: Cable · Financials

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