- The Washington Times - Monday, March 16, 2009

Charter Communications Inc., the nation’s fourth-largest cable operator, said Monday its loss for the fourth quarter widened from a year ago and one of its subsidiaries, CCH II LLC, will not make a debt interest payment in light of a pending bankruptcy filing.

Charter, which is controlled by Microsoft Corp. co-founder Paul Allen, plans to file a prearranged Chapter 11 bankruptcy by April 1. Charter has been skirting insolvency for years, but this time it faces a combination of tight credit and billions of dollars of debt coming due. The St. Louis company hasn’t recorded a profit since it went public in 1999.

For the period ended Dec. 31, Charter said its loss climbed to $1.5 billion, or $3.96 per share, compared with a loss of $468 million, or $1.27 per share, a year earlier.

The company said its most recent results included a $1.52 billion impairment charge.

Revenue grew 6.6 percent to $1.66 billion from $1.55 billion, mainly driven by growth in its phone and high-speed Internet services.

Charter could have posted a profit for several quarters if it weren’t hampered by high interest payments on its massive debt. In the fourth quarter, it paid $486 million interest.

Adjusted earnings before interest, taxes, depreciation and amortization came to $620 million in the quarter, up 10 percent. The figure excludes the impairment charge and other one-time items, as well as stock compensation expenses.

Charter’s business has improved, especially after the introduction of phone and Internet service, as well as its entry into the small and medium-size business market. Digital TV and the popularity of high-definition programs also helped the business.

“Operationally, the company continues to perform according to expectations,” said Moody’s Investors Service analyst Russ Solomon. While it didn’t post a robust quarter, Charter continues to show “improving trends that has been noted over the last couple of years.”

The number of basic video subscribers fell in the quarter by 75,100, a trend seen by other cable operators, and digital subscriber rolls grew, albeit at a slower pace than in the prior year _ up 22,300 compared with an increase of 59,500.

High-speed Internet signups were up 22,900 compared with 50,500. Phone service growth was halved to 75,200.

The average monthly revenue received from subscribers rose by 10 percent to $108.27, boosted by subscriptions to advanced services, more expensive tiers and bundled packages of video, Internet and phone service.

“Our success in growing the bundle, even in a challenging economic environment, demonstrates our competitive position in this industry,” Chief Executive Neil Smit said in a statement.

The company has been struggling with debt, however. It said that subsidiary CCH II LLC will not make an interest payment scheduled for Monday on certain senior notes. Charter says it plans to file for Chapter 11 before the end of the 30-day grace period allowed on the payment.

Charter had about $21.7 billion in total debt as of Dec. 31. Holders of $8 billion of debt agreed to swap it for nearly complete ownership in the new company, and certain old debt was exchanged for new debt. After bankruptcy, Charter will still have $13 billion of mostly bank debt, expiring from 2013 to 2016.

In a prearranged bankruptcy, a company enters into reorganization with a plan to emerge that has the approval of major stakeholders. The rest of the creditors will be dealt with through bankruptcy court. In a prepackaged bankruptcy, each creditor has voted on the plan before the filing.

Charter posted a full-year loss of $2.45 billion, or $6.56 per share, compared with a loss of $1.62 billion, or $4.39 per share, in 2007.

Full-year 2008 sales climbed to $6.48 billion, up 7.9 percent from $6 billion, in 2007.

Charter serves 5.5 million subscribers in 27 states. The stock fell 1 percent to 2.08 cents from 2.1 cents in midday trading.

(This version CORRECTS Corrects prepackaged bankruptcy to prearranged in 2nd graf. ADDS analyst comment, byline, stock price. REWRITES thruout. REMOVES dateline. ‘Smit’ in 11th graf is cq. Moving on general news and financial services.)

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