Charter Reorganization Plan Approved

Operator Says New Stock Could Come Early Next Year

Mike Farrell -- Multichannel News, 11/18/2009 11:07:23 AM

U.S. Bankruptcy Court Judge Robert Peck made it official Tuesday, issuing his formal decision on Charter Communications' reorganization plan, paving the way for a recapitalization of the company and a new stock.
Peck, who had read his decision to approve the plan in open court last month, handed down his decision Tuesday. With the document in hand, Charter can now move forward with its plans to reorganize the company. In a statement, Charter said that it could issue a new stock on the NASDAQ system - its current shares would be worthless - not less than 45 days after emergence. That would likely mean that a new Charter stock wouldn't hit the market until early next year.
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.
In a statement, Charter CEO Neil Smit was obviously pleased with the outcome.
"The Court's confirmation of our plan is a great accomplishment for Charter and a positive outcome for our customers, vendors and employees. It reflects the support of our many stakeholders," Smit said in the statement. "Throughout this process, Charter has taken great care to consistently put customers first, while posting solid operating results.
With the bondholders on board, Charter had hoped that the bankruptcy process would move quickly - it had originally expected to gain approval by the end of the summer. That was not to be after a handful of banks opposed the plan - claiming it constituted a change of control which would allow them to redo their loan agreements with the company- and kicked off 16 days of testimony.
In his decision, Peck admitted that the process was difficult.
"These are perhaps the largest and most complex prearranged bankruptcies ever attempted, and in all likelihood rank among the most ambitious and contentious as well," Peck wrote. "... "Given the state of the capital markets, the restructuring proposed here by Charter represents an extraordinary achievement..."
Still, Charter said it expects some opponents to try to block the approval.
"The company anticipates that certain objectors may appeal the court's confirmation of the pre-arranged plan, as well as seek to stay the proceedings during the pendency of the appeal," Charter said in a statement. "Unless a court orders a stay of the court's confirmation while an appeal is pending, the company expects to move forward with satisfying the conditions to the pre-arranged plan's effectiveness and anticipates the pre-arranged plan becoming effective even if an appeal is still pending."