Cable Operators

Charter’s Coming Back, At $30 A Share

4/26/2010 12:01 AM Eastern

Charter Communications is coming
back to the public.
The cable company set the wheels in
motion to return to the NASDAQ stock exchange,
filing documents with the Securities
and Exchange Commission late April 21
placing a value as high as $35.71 per share
on its stock.

Among the biggest potential sellers: former
chairman Paul Allen. He could unload
about 8 million Charter shares on the open
market, reaping as much as $285 million.

Charter was delisted by NASDAQ last year
after filing for Chapter 11 bankruptcy protection.
Its stock was trading for pennies a
share.
After emerging from bankruptcy in November
with a healthier balance sheet — minus
about $8 billion in debt and plus about
$3 billion in new equity — Charter said it
would eventually return to NASDAQ.
Charter’s been trading on a when-issued
basis since December on the over-the-counter
market under the symbol “CCMM.” Prices
have ranged from $30 to $36.

Charter didn’t give an exact date for its
planned return to the NASDAQ National
Market System, but when it does it will be
with the symbol “CHTR.”

The stock’s maximum price was estimated
at $35.71 per share.

$3 BILLION SET TO SELL
Charter said in the filing that existing
shareholders — mainly its bond investors
— could sell a total of 85.97 million shares
of stock. At the maximum price, that would
work out to be about $3 billion.

Among the sellers, according to the fi ling,
is Allen, whose shares are valued at about
$285.7 million.
After the deal is closed — Charter has not
yet set an official date — Allen, who will still
hold the largest voting interest in the company
at 35%, could hold only 0.55% of equity, or
about 653,000 shares.

Allen stepped down as chairman in December,
post-bankruptcy, replaced by Apollo
Management partner Eric Zinterhofer. He
also left the board of directors.
In the late 1990s, armed with a bank account
bursting with Microsoft stock (his estimated
net worth in 1999 was $40 billion,
according to Forbes), Allen embarked on a
cable-system buying spree to stoke his vision
of a “Wired World,” where consumers would
receive their telecommunications and entertainment
products through the cable plant.
When Charter went public in 1999 — in a
$3.2 billion IPO, at the time the third-largest
such transaction in history — Allen used the
stock as a deal currency to acquire more and
more systems.

That strategy — and the high prices he
paid for systems — led to Charter carrying
the heaviest debt-to-cash-flow leverage ratio
in the industry. Coupled with the recent
economic collapse, that debt load led to the
bankruptcy filing in March 2009.
After the reorganization, Charter went
into the hands of its bondholders, who appear
to be gearing up to reap at least a partial
return on their investment.

According to the filing, Apollo Management
— through funds affiliated with AP Charter
Holdings — could reduce its holdings by 32.2
million shares (worth $1.1 billion) to 3.5 million
shares or 3.1% of its outstanding stock.
Other large bondholders who have registered
to sell shares include: Oaktree Opportunities Investments,
which is reducing its holdings by 16.4
million shares (worth $585 million) to 3.7 million
shares or 3.3%; Franklin Advisors, paring
its holdings by 14.1 million shares worth $503
million to 7.5 million shares or 6.5%.

MARCUS FUND SELLING

Also potentially shedding a substantial
stake is Encore LLC, a fund affiliated with
Crestview Partners, a private-equity fund
led by former cable baron Jeff rey Marcus.
Crestview, which according to the prospectus
owns 11.1 million shares, is offering
9.6 million shares worth an estimated
$342 million, paring its stake to 1.5 million
shares or 1.3% of outstanding stock.

Marcus, who sold his Marcus Cable to Paul
Allen in 1998 for about $2.8 billion, re-entered
the cable scene earlier this month through its
purchase (with MidOcean Partners) of a 42%
interest in Insight Communications.
Charter is the fourth biggest U.S. cable
operator, with about 5 million subscribers.
Last week it released preliminary fi rst quarter
results: revenue rose about 4.5%, or $1.7
billion, from the same period last year.

Basic video customers declined by 23,400
(in line with last year), off set by better than
expected gains in digital and high-speed
data customers.

Phone subscribers were up 66,900 additions
compared to 70,400 additions in the
year-ago period.

Charter said it will release complete financial
and operating results on May 6.

October