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 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.