October 15, 2009 / 9:16 PM / 11 years ago

UPDATE 2-US judge to ok Charter's reorg plan

* Charter plan beats opposition by JPMorgan, Wells Fargo

* Judge says reinstatement of debt to save Charter $3 bln

* Overrules all objections to Chapter 11 reorg plan

* To render written decision in two to three weeks.

* Charter could emerge from bankruptcy as early as Nov. 2 (Adds timing of ruling, details on reasoning, quote)

By Phil Wahba

NEW YORK, Oct 15 (Reuters) - The U.S. judge overseeing the bankruptcy of Charter Communications Inc CHTRQ.PK said on Thursday he would approve the U.S. cable operator’s reorganization plan, which would hand over control to a group of creditors that includes Apollo, Crestview, Oaktree and Franklin funds.

Judge James Peck of the U.S. bankruptcy court said the move to approve the plan would save the company billions.

Under terms, which Peck said he would approve in a written decision within two to three weeks, Charter Chairman Paul Allen, who is a co-founder of Microsoft, will keep a 35 percent voting stake in the company, but lose most of his $8 billion investment in Charter.

The reorganization plan allows Charter to shed more than $8 billion in debt while also reinstating about $11.8 billion of its senior bank debt at below-market interest rates upon its emergence from bankruptcy.

Charter could emerge from bankruptcy as early as Nov. 2.

Peck said in explaining his rationale that the debt reinstatement would save Charter $3 billion, a figure that “far outweighs” the $375 million in restitution Allen is to get.

“This is perhaps the largest and most complex prepackaged bankruptcy ever attempted,” Peck said, ruling from the bench.

Peck heard arguments about the plan for 19 days in September and October, though only five days had originally been set aside.

Charter’s proposed reorganization plan had been fiercely opposed by lenders led by JPMorgan Chase & Co (JPM.N) and Wells Fargo (WFC.N), which claimed that Charter investors at Apollo, Crestview, Oaktree and Franklin funds were “acting together” to acquire Charter via the bankruptcy and that the plan would cause an improper change-in-control of Charter.

The lenders said that Charter would be tripping a ‘change of control’ default clause if Allen no longer had full equity control of the business when it emerged from bankruptcy and the investment funds are calling the shots.

Under the loan agreements, any group could not have more than a 35 percent stake in Charter, but Peck argued that funds did not constitute a group or syndicate acting together.

Charter’s case has been closely watched in the restructuring industry as a test of the debt reinstatement concept, which has been rarely used but is supposed to be allowed under U.S. laws if the company has no other default under its debt agreements except for its bankruptcy filing.

Charter filed for bankruptcy protection in March, buckling under $21.7 billion of debt.

The judge overruled all objections to the plan at the hearing.

The case is in re: Charter Communications Inc., U.S. Bankruptcy Court, Southern District of New York, No. 09-11435. (Reporting by Phil Wahba; additional reporting by Yinka Adegoke; Editing Bernard Orr)

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