Allen Brings In the Reinforcements
By Mike Farrell -- Multichannel News, 1/31/2003 12:15:00 PM
In a sign that he's serious about shedding debt soon, Paul Allen has hired a restructuring adviser to help weigh the options for reorganizing troubled Charter Communications Inc.
Sources confirmed reports that Allen's personal investment company, Vulcan Ventures Inc., hired Miller Buckfire Lewis & Co. LLC as restructuring advisers.
Vulcan spokesman Michael Nank declined to comment but underscored Allen's commitment to cable.
'Mr. Allen is confident that technology -- with cable as a central component -- will continue to drive innovation and economic growth. Mr. Allen remains committed to Charter and the potential inherent in its sizable market share and leading-edge technology,' Nank said.
According to one investment banker who asked not to be named, Allen is trying to work out a deal to reduce debt without giving up control.
Analysts have expected Allen to buy Charter debt at about 30 cents on the dollar and retire it. But that would saddle him with a hefty tax obligation -- about $1 billion, some sources figured.
'He hired the adviser because of the tax angle,' said one investment banker who asked not to be named.
Allen's $4.5 billion net personal investment in Charter is now worth about $400 million.
He's pumped about $7.5 billion into Charter since he acquired it in 1998, but analysts estimated that he's taken about $3 billion in tax credits as Charter's stock plunged in the past year, reducing his net investment to about $4.5 billion.
Miller Buckfire chairman and managing director Henry Miller did not return a phone call seeking comment.
Choked by about $20 billion in debt, Charter has also struggled with heavy subscriber losses and a federal grand-jury investigation into some accounting practices. In December, it disclosed that it fired its chief operating officer and chief financial officer.
With an annual cash flow of about $2 billion, most analysts believe Charter is unable to service its debt.
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