Charter expected to File Chapter 11

 

By: Pat Hunter

February 18, 2009

 

 

According to the Bloomberg Report and CNN Money, newspaper stories and the Charter website, Charter Communications is expected to file for Chapter 11 bankruptcy as part of a financial restructuring on or before April 1. 

 

The cable-television company has been losing money and it reached an agreement to restructure its debt by about $8 billion.

 

Charter Communications is the 4th largest cable company. The company is based in St. Louis and has about 5.6 million customers in 28 states with controlling interest by Microsoft Corporation, co-founder Paul Allen.

 

This news was confirmed on the Charter website and by personal email on Tuesday. An email was sent to the Director of Government Relations asking how this would affect service and rates for local customers. The rep. was quick to respond. A letter was sent to governments across Tennessee in  Charter service areas explaining what will happen in months to come. The letter to local government is a matter of public record.

 

In June 2006, Loudon County commissioners discontinued participating in the Cable Authority with Lenoir City and Loudon City. Charter customers that live in the county outside of the cities have no representation on the Cable Authority even though Loudon County continues to collect and spend fees generated from county cable customers. What's that called - taxation without representation?

 

Examples of some fees and taxes charged to Charter customers:

Cable Franchise Fee:             $3.87

Cable State Sales Tax:           $2.16

Telephone County Tax:               48 cents

Telephone State Sales Tax:    $2.56

 

 

Charter letter to government.

 

February 13, 2009

Mr. Claude Ramsey

County Executive

County of Hamilton

Hamilton County Courthouse

201 Seventh Street, Room 208

Chattanooga, TN 37402

Dear Mr. Ramsey:

I wanted to let you know about an important step Charter has taken to improve our financial structure.  Specifically, we recently reached an agreement-in-principle with a key group of our bondholders to significantly reduce our debt and increase our financial flexibility.  This agreement, once approved and effective, will reduce our debt by $8 billion.  In addition, these bondholders will invest more than $3 billion in Charter, which will both refinance current debt and provide new capital.  Their willingness to increase their investment in Charter underscores their confidence in our business. 

In order to implement the plan as expeditiously as possible, we anticipate seeking court approval of the agreement in a voluntary Chapter 11 filing sometime before April 1st.  As you may know, the Chapter 11 process is specifically designed to enable companies to continue to operate as usual while they develop and implement financial restructuring plans.   Charter is committed to serving our customers and the communities that we serve, both now and in the years ahead.

Charterís operations are strong -- we just reported the ninth consecutive quarter of adjusted EBITDA growth.  And as of February 11, we had approximately $800 million in cash, and believe that this, combined with our cash from operating activities, will be sufficient to meet Charterís projected cash needs, including the payment of normal operating costs and expenses, as we proceed with our financial restructuring.  We believe that the financial restructuring actions we are taking will help us maximize Charterís underlying value.  We are committed to bringing our customers the best, most reliable services, and we look forward to being their provider of choice for high quality video, internet and telephone services for many years to come. 

We value our relationship with your community and will work to maintain this relationship throughout this process.  We appreciate that our 5.5 million customers rely on us for their communications and entertainment needs.  I want to assure you that we are committed to emerging from this process as a stronger, more competitive company and a valuable partner to the communities we serve, our customers and our vendors for many years to come. We will work to ensure that our operations continue as usual and that service to our customers will not be interrupted.   In addition, we will continue to pay all franchise fees and other amounts due under our franchise agreements.

 

Charter.com informs customers

"We're Making Charter Stronger"

"Dear Valued Charter Customer:

At Charter, we are committed to bringing your home to life through advanced video services, including a growing high-definition offering, faster Internet speeds, and a choice for telephone service. We know that you rely on us for your entertainment and communications needs. We are committed to bringing you the best, most reliable services and we look forward to serving you for many years to come.

On February 12th, we issued a press release announcing an agreement with our bondholders to significantly reduce our debt and increase our financial flexibility. These bondholders will invest more than $3 billion in our Company, which will both refinance current debt and provide new capital. Their willingness to increase their investment in our Company underscores their confidence in our business. In order to implement the plan, we anticipate seeking court approval in a voluntary Chapter 11 filing sometime before April 1st. This process is designed to enable companies to continue to operate while they develop and implement financial restructuring plans. So, no matter what you may have heard, Charter is committed to serving you both now and in the years ahead.

Rest assured that our operations are strong, and that we continue to focus on enhancing our products and services. We know that speed and reliability are what Internet customers value most, and just last month we launched Charter High-Speed Internet Ultra60 with 60 Mbps speed, the fastest residential Internet service in the country. We will soon boost Charter High-Speed Internet Max from 16 Mbps to 20 Mbps, at no additional charge. We also continue to expand our high definition offerings, including over 400 movies and shows in HD On Demand.

Please check Charter.com frequently to learn about our new products and services. In the meantime, our family of more than 16,000 employees will continue to deliver great entertainment and keep the millions of families we serve connected to the things that matter most.

Sincerely,

Neil Smit
President and CEO"

 

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02-18-09