Judge Approves Charter Reorganization Plan

Final Decision Expected in "Several Weeks"

Mike Farrell -- Multichannel News, 10/16/2009 2:52:31 PM

U.S. Bankruptcy Court Judge James Peck said Thursday that he would approve Charter Communications' reorganization plan, capping a nearly seven-month odyssey for the fourth largest cable operator in the country.
Charter filed for Chapter 11 bankruptcy protection on March 27,and filed a reorganization plan that would shave about $8 billion in debt from its books and pump another $3 billion in equity into the company.
The reorganization would reduce Charter's overall debt load to about $13 billion from its current $21 billion level. And with a large chunk of its debt converted to equity, Charter expects to pay down that debt even further with the free cash flow it will generate. According to the plan, Charter expects its long-term debt to shrink to $11.3 billion in 2013.
The deal was pre-approved by Charter's largest bondholders -- mainly Apollo Asset Management, Oak Tree Capital Partners, Crestview Asset Management, Fidelity and Franklin Resources - who have agreed to swap most of their debt for equity in a new Charter entity. Charter chairman Paul Allen - who currently holds 91% of Charter's voting shares - would see that position dwindle to 35% voting control. Allen will remain the single largest individual holder of voting shares in the new company.
While Charter had expected to move through the bankruptcy court rather quickly - it had originally anticipated emerging from Chapter 11 in the summer - a handful of banks objected to the plan, claiming it constituted a change of control that would allow them to redo their existing bank loan agreements with the cable company.  That kicked off 16 days of testimony in bankruptcy court. Peck was originally supposed to make his decision on Sept. 30, but pushed back that date after closing arguments from both sides took longer than expected.
According to reports, Peck read his decision from the bench last Thursday, who according to the Wall Street Journal called the trial "one of the most hotly contested confirmation battles ever conducted."
In a statement, Charter said Judge Peck is expected to make his decision final in the next several weeks. The company will emerge from Chapter 11 shortly thereafter.
"The court's bench ruling today is a major milestone, having found in favor of Charter on all significant issues," said Charter CEO Neil Smit in a prepared statement. "I am proud that Charter has consistently put customers first and has posted solid operating results throughout this process, which is a testament to our dedicated employees and supportive stakeholders. We will emerge as a stronger company with a significantly improved capital structure. We look forward to continue to serve our customers with enhanced products, services and support."