Charter to file bankruptcy as part of restructuring

Charter Communications, the money-losing cable-television company, said it plans to file for Chapter 11 bankruptcy as part of a financial restructuring on or before April 1.

Charter said Thursday in a statement that it reached an agreement with a committee of some debt holders to reduce its obligations by about $8 billion. Controlled by Microsoft Corp. co-founder Paul Allen and based in St. Louis, Charter has about 5.6 million customers in 28 states, according to its Web site.

The cable company has sold the most U.S. high-yield bonds of any company in the past decade, according to data compiled by Bloomberg. Allen bought Charter in 1998, amassed the company’s debt burden while building it into the fourth-largest U.S. cable provider. Charter, which has reported losses every year since going public in 1999, added telephone, digital-TV and Internet services to compete with larger rivals and fiber-optic networks.

“The restructuring was coming one way or another,” Matt Dundon, managing director of distressed analysis at Miller Tabak Roberts Securities, said in a phone interview. “Even with the $8 billion debt reduction figure, the company is still heavily indebted and vulnerable to further restructuring if EBTDA takes a turn for the worse.”

“They’ve done what we anticipated, taking a prepackaged bankruptcy,” Dundon said.

In December, Charter started talks with bondholders on “financial alternatives” including restructuring. Through the first three quarters of 2008, Charter lost almost $1 billion.

Charter had its debt rating lowered two levels by Moody’s Investors Service, signaling the cable-television carrier is at increasing risk of default.

The rating fell to Caa3 from Caa1, New York-based Moody’s said in a statement Wednesday. The new rating, nine levels below investment grade, reflects the likelihood of “imminent default” after Charter missed an interest payment on its debt last month, the ratings service said.

Last week, Charter said it hired Greg Doody, the lawyer who helped Calpine Corp. emerge from bankruptcy.