Charter Tilts Towards Bankruptcy; Moody's Downgrades Cable Operator's Debt

This story was written by David Kaplan.
Even though Charter Communications (NSDQ: CHTR) has been taken steps in recent days to help it meet its upcoming maturities, Moody's Investors Service believes that the cable operator is heading toward bankruptcy. As a result, Moody's lowered Charter's corporate family rating down two steps to "Caa3," nine levels below investment grade, Reuters reported. Charter, which is controlled by Microsoft (NSDQ: MSFT) co-founder Paul Allen, has a $74 million debt payment due on several of its divisions' credit. The maturities on the debt expire on February 15, 2009.

Moody's said that even if Charter can make the interest payments before the expiration of the grace period, it will likely have to file for Chapter 11. That said, Moody's outlook on Charter remains stable, however. The ratings agency estimates that bondholders may recover about 65 percent of the debt's value, on average, in a Chapter 11 reorg. At mid-day, Charter shares slid 2.37 percent to $0.0742.

By David Kaplan