Charter Cut by S&P on Debt Worry, Follows Moody's
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NEW YORK (Reuters) - Charter Communications Inc.'s credit rating was cut deep into "junk" territory on Friday by Standard & Poor's on what the credit agency called "rising concern" that the No. 3 U.S. cable TV operator will need to restructure its debt.
The downgrade followed a similar cut on Wednesday by Moody's Investors Service, which said the St. Louis-based company, controlled by Microsoft Corp. co-founder Paul Allen, needs to get rid of as much as $6 billion of debt.
S&P estimated Charter's debt load at $18.5 billion, while Moody's put the amount at about $21 billion.
S&P cut Charter's corporate credit rating two notches to "CCC-plus," its fifth lowest "junk" grade other than default, from "B." It said it may further cut Charter's ratings.
Charter faces heavy competition, the loss of some of its 6.7 million subscribers and a federal grand jury probe over its accounting.
"Given depressed debt trading levels and the company's operational challenges, Charter could be further pressured to reduce debt through a restructuring," S&P analyst Eric Geil wrote. "The downgrades are also based on greater uncertainty regarding management's financial strategy."
Charter was not immediately available for comment.
Moody's on Wednesday cut most of Charter's senior unsecured debt to "Ca," its second lowest grade.
Charter shares closed Friday on the Nasdaq at $1.20, down 6 cents. They have fallen 19 percent since Tuesday, before the Moody's downgrade, and 91 percent in the last year.
DEBT RESTRUCTURE TALK "SPECULATION"
On Wednesday, spokesman David Andersen dismissed as "speculation" a report that the company hired investment banker Lazard Freres to restructure its debt. A person familiar with the matter said Charter had not hired Lazard in any capacity.
Though ratings in the "triple-C" or lower category, such as from Moody's and S&P, suggest an elevated risk of default, analysts downplayed the potential for a Charter bankruptcy, saying Charter has at least enough cash to get through 2003.
Charter said in November it would reaudit and restate its financial results from 2000 through the first half of 2002, after underreporting costs and tax liabilities from purchases in 1999 and 2000. It also said fourth-quarter operating cash flow would fall short of its previously announced target, and that revenue growth will be at the low end of its estimates.
Charter's 8.625 percent notes maturing in 2009 traded late Friday at 45 cents on the dollar, yielding 27.64 percent, according to TRACE, the NASD bond pricing service. They closed Tuesday at 51.75 cents, yielding 23.91 percent. |
