Charter (CHTR): Cable’s Achilles Heel

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Charter (CHTR) is down over 10% to $3.90. Some of that is in sympathy with the drop in Comcast (CMCSA) which put out earnings this AM. Wall St. was concerned about the larger company’s drop in basic cable subscribers and its high capex.

But, Charter’s problem is much more severe. It has $19 billion in debt, all of it with low ratings. In a difficult debt market, the company is not going to be able to be able to raise more money or do the kind of refinancings that have helped the stock.

Charter needs to increase its capital expenditures to improve plant and equipment to stay competitive with telecoms for digital cable, broadband, and VoIP. Raising its capex in a tight credit market when the company already has so little margin between operating income and debt coverage is going to he hard.

In some ways, it is surprising the shares are not off more.

Douglas A. McIntyre