The restructuring, which requires court approval, would reinstate around $12 billion in bank and bond debt for the St. Louis-based company. JPMorgan and Bank of America are lead lenders, holding around $8.5 billion of Charter's debt. The company's long-term debt is at around $21.7 billion, according to Fitch Ratings. In 2008, the company lost $2.45 billion on $6.48 billion in revenue.
"We took an important step forward today, as planned with our financial restructuring, which is good news for Charter customers, employees and vendors," a Charter spokeswoman tells GlobeSt.com. She says the restructuring will not impact any of Charter's owned or leased real estate. The company has 16,000 employees nationwide.
Currently, Charter pays franchise fees in 3,200 cities and counties. The spokeswoman says that now that franchise fees have been passed in some states, those states collect fees for cities and counties.
"Our prearranged filing will reduce our debt load by $8 billion and provides $3 billion in new money to support overall refinancing," the spokeswoman tells GlobeSt.com, adding that Charter's operations are strong and that the company will continue to provide all services as usual. Charter will appear in court on Monday for first-day motions where it will seek approval to maintain current operations and a $150-million bond agreement with Travelers Co.
Friday's filing caused Fitch Ratings to immediately downgrade Charter Communications' Default Rating IDR from C to D. Fitch also upgraded the senior secured credit facilities issued by Charter Communications Operating, LLC and CCO Holding, LLC and the senior second-lien noted issued by Charter.
Reportedly, if the court does not allow reinstatement and creditors are instead successful in securing higher pricing, Charter's restructuring plan will fall apart. Fitch says in a release that if Charter is successful in court, Fitch expects Charter to emerge from bankruptcy with total leverage ranging between 5.5x and 6.0x based on actual EBITDA of $2.319 billion.
According to an SEC Form 8 document filed Friday, Charter named Gregory L. Doody as its chief restructuring officer and senior counselor on March 25. Charter will pay Doody a base salary of not less than $60,000 per month to evaluate and implement "strategic and tactical options" through the process of restructuring the company's balance sheet among other duties. Doody successfully led the out of court restructuring of both Health South Corporation and Calpine Corp.
Still, some sources tell GlobeSt.com that more than a few bankers are calling the Charter prearrangement the largest pre-filing of its kind to date. One source says Charter filed the bankruptcy because it was unable to extend maturities of its debt, a result of the ongoing financial crisis. The source says that the company's filing has the support of a large group of bondholders, which allows Charter to push this through relatively fast, adding the entire process is following a fairly expedited timeline. Sources tell GlobeSt.com they expect the company to emerge from bankruptcy as soon as "late summer" and re-list on NASDAQ, staying a publicly traded company.
Major bondholders include Oaktree Capital Management LLC, Franklin Resources Inc and Apollo Management. Earlier press reports said the restructuring would allow bondholders to exchange $1.2 billion in notes for new notes, buy $267 million in new notes and backstop a $2-billion rights offering.
Reportedly, Apollo Management assumed a large equity stake in Charter on March 20 of this year. A source tells GlobeSt.com that despite earlier reports that Apollo Management would gain company control, Allen will retain a 35% voting stake in Charter, although existing Charter shareholders will be wiped out. Apollo declined to comment.
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