Charter cable looking to emerge from bankruptcy

“On Monday, Charter Communications Inc. (CHTRQ) will ask the Manhattan bankruptcy court to sign off on its plan to exit Chapter 11 protection. Ahead of Monday’s hearing, the St. Louis cable company sweetened the plan for some bondholders, offering them a higher recovery on their claims.

The amended plan calls for the amount of preferred stock that holders of convertible senior notes are slated to receive to increase to $138 million from $72 million. Those bondholders, owed $497 million, will also see the dividend rate on their preferred shares increase to 17% from 15% in the fourth year of holding the stock, and to 19% in the fifth year. The mandatory redemption date on those shares will be reduced to five years from seven years, the company said.

The bondholders will also receive a $24.5 million cash payment.

Charter’s bankruptcy plan would wipe out about $8 billion in debt and would raise $3.4 billion in new debt and equity. Some bondholders would exchange $1.2 billion in notes for new notes, buy $267 million in additional notes and backstop at least a portion of a $2 billion rights offering.

Existing shareholders would be wiped out, with the exception of Microsoft Corp. (MSFT) co-founder Paul Allen, who controls Charter. He would see his voting control over the company cut to 35% from 91%.

Charter plans to reinstate the $8 billion in outstanding loans from senior lenders while leaving the pricing on the loans unchanged when it exits bankruptcy.”

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Paul Allen sells Charter stock for almost nothing

“How do you make a small fortune in the cable industry? If you’re Paul Allen, you start with avery large fortune. A recent filing reporetedly shows that Allen ditched about 28.5 million shares ofCharter Communications Inc. (Nasdaq: CHTR) stock for less than $1,000. That equates to mce_marker.000035 per share in the debt-laden MSO, which is trying to get out of bankruptcy. ”

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Suing Paul Allen & Charter for securities fraud

“Charter Communications shareholder Herb Lair is suing Microsoft co-founder Paul Allen for securities fraud. Here, he explains why.”

…

Many thought he (Paul Allen) paid too much for [local cable] systems that he bought around 1999 and thereafter. However, the [local cable] systems he bought were around $4,000 a subscriber. That amount was comparable to what Cox paid for the TCA systems in Arkansas, including Harrison and Rogers. Also comparable to what Comcast, Time Warner, and Mediacom paid. They all have made their purchases successful.

Paul Allen made several mistakes in the management of the [local cable] systems and started growing debt at a high rate. Mistakes included his choice of managers, capital expenditures (cap-ex), marketing, and debt management. He attempted to run the business as an absentee owner.

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Charter’s Paul Allen and the rejected remote

“A few years ago, billionaire Paul Allen instructed the design team at Digeo, his Seattle-based digital video recorder company, to come up with a TV remote that was like a cell phone, according to a well-placed source.

Allen felt there had to be a better way to control a digital video recorder than the traditional cable remote, with its dozens of buttons. He’s known to be hands-on with many of his investments, including Charter Communications.

So the Digeo designers spent well over $100,000 developing a remote that literally looked like a mobile phone, this source said — it even flipped open like a Motorola Razr.

But when they presented the device to Allen, he took one look at it said, “I didn’t mean it had to look like a cell phone. I just meant it had to be as easy to use.” The project was subsequently abandoned, according to the source.”

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Charter creditors wanted Paul Allen in control

This article chronicling how the Charter bankruptcy went from dire to smooth, explains that the creditors that put up an additional $3 billion in credit, $2 billion of it equity did so only if Paul Allen, the company’s founder continue to remain in control of the company.  Why?  Is it because he has such resources that otherwise, the company would fail?  If its because he epitomizes the company, that’s not too bright given his very poor track record.  The article in general was a bit over my head.

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Allen selling some Charter shares

But Paul Allen will retain his majority shareholder position despite selling 28 million of his 406 million shares.  Of course with Charter trading at 2 cents a share his 28 million shares is worth approximately $569,000.  His voting control of the company is now down to 35% down from 91% earlier.

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Shouldn’t Paul Allen be ousted from Charter Cable?

Charter Communications hasn’t made a profit since it went public in 1999.  It has such terrible customer service that it has been sued multiple times for the way it ignored and screwed up customers’ cable service.  It is more than $20 billion in debt.  Despite all this and filing for bankruptcy, the company has the funds to pay its top executives $9 million.  Why is Paul Allen still allowed to have controlling voting interest in this company with this track record?

Article on Charter’s executive bonuses

Paul Allen, Microsoft co-founder loses $7 billion on Charter Cable

Its seems that Mr. Allen thought cable was the future but now the Charter Communications chairman who holds a 51% stake in the company has stock valued at 8 cents a share.  But then the company hasn’t been profitable since 1999 the year it went public.  Any day now, I expect to hear that its filing for chapter 11.

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