Moody's Investors Service lowered its probability-of-default rating on Charter Communications to Ca from Caa2 last Friday, meaning it sees a default as being more likely and that the cable company could be headed for bankruptcy court next year.
Moody's rating change was prompted by the St. Louis-based MSO's announcement Dec. 12 that it asked financial adviser Lazard LLC to initiate discussions with bondholders regarding a possible debt restructuring. Moody's said it expects default is imminent at Charter and that a restructuring is likely to occur in 2009.
In an interview, Solomon said he doesn't think Charter will be forced into bankruptcy court immediately — but he does think the company may be trying to assemble debtors to agree upon a pre-packaged bankruptcy filing, which would facilitate a debt-for-equity swap.
Charter would not comment on bankruptcy speculation, but said the objective of the bondholder discussions “is to improve the company's balance sheet and enhance its financial flexibility that will better position Charter for the future and is in the best interest of its customers.”