Moody's cuts Charter, cites bankruptcy expectation

NEW YORK Wed Feb 11, 2009 12:47pm EST

NEW YORK Feb 11 (Reuters) - Moody's Investors Service on Wednesday cut its ratings on Charter Communications Inc (CHTR.O) to an even more speculative grade, citing an expectation that the company faces an imminent bankruptcy.

Moody's cut Charter's corporate family rating two notches to "Caa3," nine steps below investment grade.

The downgrade reflects the increased likelihood of default as the grace periods for missed interest payments totaling approximately $74 million on several of Charter's subsidiaries' debt are set to expire on February 15, 2009, Moody's said in a statement.

Charter, the U.S. cable operator controlled by Microsoft Corp (MSFT.O) co-founder Paul Allen, has hired a turnaround expert as the deadline to meet the interest payment looms, according to a person familiar with the company. For details, see [ID:nN06474131]

"Even if the interest payments are made prior to expiration of the grace period, Moody's anticipates Charter will likely have to file a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code," Moody's said.

The company's outlook is stable, however, indicating Moody's estimate that bondholders may recover around 65 percent of the debt's worth, on average, in a restructuring.

Charter failed to make the interest payment in January even though it had more than $900 million in cash available to pay operating costs and expenses.

"The recent revolver draw-down which left the company with more than $900 million of cash balances as reported in January will effectively preclude the need for a separate Debtor-In-Possession loan, the financing of which may have been difficult to come by given ongoing tightness in the credit markets," Moody's said.

(Reporting by Karen Brettell;Editing by Diane Craft)

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