Debt Helps Leverage Charter Downgrade


Deutsche Bank Alex. Brown cable and satellite analyst Karim Zia lowered his rating on Charter Communications Inc. from "strong buy" to "buy," citing the company's high leverage and an overall cautious stance on the cable industry. Zia reduced his seven-year compound annual revenue-growth rate for Charter from 11.9 percent to 10.5 percent and its cash flow growth rate from 13 percent to 11.2 percent. He also increased his post-2003 average annual capital expenditure per basic subscriber for the company from $120 to $160. As a result, the revisions forced Zia to lower his 2002 target price for Charter stock from $24 per share to $18. Charter stock closed at $9.55 April 17, down 32 cents.