Charter (CHTR) Raises Money For A Lost Cause
March 12, 2008 by Douglas A. McIntyreCharter Communications (NASDAQ:CHTR) raised another tranche of junk debt, about $1 billion. That will sit on top of the $19 billion which the company, controlled by billionaire Paul Allen, already has.
Just because Charter can raise some cash does not mean it can be saved. It is a lost cause, at least financially.
Charter now competes in the world of telecom fiber-broadband offerings and satellite TV which can bring in a dizzying number of high definition channels. As an old-world cable company, it has to upgrade its plant to compete. That is a multi-billion dollar proposition. Charter does not have that money. The telecom and satellite guys know that.
Last quarter, Charter had operating income of $85 million. Its debt service was $464 million. That is, as they say, a bad ratio. It is nearly impossible to see how the company can operate without destroying the value of its commons shares. Wall St. seems to have figured that out. Charter trades at $.93, down from a 52-week high of $4.93.
The common stock in Charter will be worthless soon, a good bathroom wall-paper or covering for the floor of a bird cage.
Douglas A. McIntyre
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