Charter Communications Inc. stock plunged nearly 13 percent Wednesday after a major downgrade of its debt and speculation that the company
may be heading toward a prepackaged bankruptcy filing.
Charter stock closed at $1.29 per share Wednesday, down 19 cents, on the heels of a four-notch downgrade of the company's debt
by credit-rating agency Moody's Investors Service.
Adding to the bad news are reports that Charter has hired investment bank
Lazard Fréres & Co. LLC to restructure its $18 billion in debt. In many
cases, that is usually the first step toward filing a prepackaged
Charter spokesman Dave Andersen said the company would not comment on rumor
and speculation regarding the Lazard hiring. "When we have a restructuring plan,
we'll bring it to the market. It's not something we're ignoring," he said.
Moody's lowered its rating on the senior unsecured notes of Charter
Communications Holdings LLC -- a subsidiary that issued most of the company's
$10.5 billion in high-yield bonds -- to "Ca" from "B3" Wednesday. The parent
company's senior unsecured issuers rating was cut to "Ca" from "Caa2."
Moody's added that the 6.7 million-subscriber MSO is in danger of defaulting
on some of its loan commitments.
"Moody's believes rapidly growing loan-amortization payments and debt
maturities scheduled for year-end 2003 and 2005 will be very difficult to meet
without some form of restructuring and/or capital injection," Moody's wrote in
The ratings agency added that the Charter's future cash flow can only support
about $14 to $15 billion in debt.
"In the end, Moody's has got to do what they have to do, based on their own
independent analysis," Andersen said regarding the downgrade.
"Our practice is always to maintain open dialog, to keep them apprised of our
plans to maintain and enhance our operating practices and balance sheet," he
added. "For our part, Charter remains committed to this business, and we will
continue to do all we can to shore up the balance sheet."