Bankruptcy filing looms for Charter

Subsidiaries fail to make interest payments

NEW YORK -- Two subsidiaries of Charter Communications did not make scheduled interest payments worth $73.7 million on some of its debt by a mid-January deadline, raising the potential for a bankruptcy filing.

The cable operator, controlled by Paul Allen, has been in discussions with its bond holders to restructure its debt since December and said Thursday that it has the right to make the interest payments within a grace period that ends in mid-February. If it doesn’t make those payments by then, it will be considered to have defaulted on its obligations.

St. Louis-based Charter said it and its subsidiaries had more than $900 million in cash and cash equivalents as of Jan. 13, which it is earmarking for operating costs and expenses.

“We've made significant progress over the last several years with regard to operational improvements, and we hope to make similar progress with regard to our capital structure,” Charter president and CEO Neil Smit said. 

Citi Investment Research debt analyst David Hamburger said the news increases the likelihood that Charter will file for bankruptcy protection. “We view the probability of a Chapter 11 filling as likely given how difficult it will be to negotiate an agreement with … bond holders in order to successfully restructure the balance sheet outside of bankruptcy,” he said.

Especially in case of a default, Charter faces cascading financial challenges, Hamburger said. An interest payment default would “permit at least 25% of the holders of the notes to accelerate payment,” he said. “An acceleration of payment of $100 million in principal would trigger cross-defaults on Charter’s other debt.”

Wall Street chatter about a possible Chapter 11 filing from Charter had heated up again starting late last year.