After months of speculation, Charter Communications said Thursday that it has reached a deal in principle with certain debtholders in a restructuring that will reduce its debt by $8 billion and result in the St. Louis-based MSO filing a Chapter 11 bankruptcy petition.
Analysts have been waiting on a Chapter 11 filing for months -- Moody's Investors Service senior vice president Russell Solomon was the first to raise the issue in December. A pre-packaged bankruptcy such as Charter appears to be proposing -- one where the major debtholders have already reached agreement -- is fairly common and would allow the MSO to emerge rather quickly with a healthier balance sheet.
Past operators that have made similar filings include overbuilder RCN, which filed a pre-packaged Chapter 11 in May 2004, and emerged about six months later with a healthier balance sheet and a stronger stock. In 2002, NTL, now Virgin Media, filed a pre-packaged Chapter 11 that erased about $11 billion in debt. In an interview Thursday, Solomon said that the restructuring appears to be just what Charter needed. "This gives them another running head start," Solomon said.