Debt-laden cable operator Charter Communications (NSDQ: CHTR) is negotiating a partial sale with PE firm Apollo Management, Reuters reported. Last month, Charter said it would seek bankruptcy protection. The St. Louis-based Charter, the number four cable company in the U.S., has been working on agreements with some of its creditors lowering its $21 billion in debt by roughly $8 billion.
Apollo already holds a substantial amount of Charter's debt. The way things have been shaping up, Apollo's debt would be converted into equity when Charter goes through bankruptcy proceedings. Microsoft (NSDQ: MSFT) co-founder Paul Allen would still maintain control of Charter through a 35 percent voting stake, though he would only own 3 percent of the equity. Under existing bank loan agreements, Allen can maintain control because a clause stipulates that the banks are allowed to reprice Charter's debt at a significantly higher rate if the company changes hands.
With the days of leveraged buyouts on hold due to the credit crisis, WSJ notes that PE firms like Apollo are looking for cheap takeover targets by aiming its acquisition plans at companies going through bankruptcy. Apollo founder Leon Black has told investors that he plans to do just that.
By David Kaplan