The Deal
Sunday, November 22, 
12:06 am

Charter shores up liquidity

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Charter Communications Inc. alleviated some of the immediate concerns about its liquidity when it announced late Tuesday that it would raise more debt than originally expected, which should see the St. Louis cable operator through until 2010 -- unless of course it's sold first.

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The company arranged a $500 million term loan that was originally expected to total $275 million. It has also priced $520 million in second-lien notes. Richard Greenfield of Pali Capital Inc. wrote Wednesday that together with $1 billion available through an existing term facility, the new debt will fund the company through 2010. However, there is still uncertainty about cryptic remarks made in a Tuesday Securities and Exchange Commission filing that Chairman Paul Allen has fielded "informal inquiries" from various unnamed parties about "investments or transactions."

Purchases or swaps of cable systems in some markets may be the most likely, if also the most pedestrian, possibility. Jason Bazinet of Citigroup Global Markets Inc. wrote in a report that if Charter succeeds with the term loan and second-lien notes, sales of cable systems become less likely.

An equity infusion may seem unlikely given the longer-term concerns about Charter's liquidity, and the potential to jeopardize billions of dollars in net operating losses that could be applied to future tax bills. Charter has said that a change in control would place "significant annual limitations" on the NOLs.

Additionally, holders of Charter notes that mature in 2010 have leverage to pull off some kind exchange. Paying their obligations is the next serious hurdle that Charter must pass, even if it is two years out. - Chris Nolter



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