Charter Communications has $6.4 Billion in annual revenue, yet has currently
filed for Chapter 11 protection. This, in spite of the fact that they are NOT
in default and have, in the words of their own CFO Eloise E. Schmitz, more than
enough cash available to them to meet their commitments through at least the 4th
quarter of 2010. Indeed, in the 3rd quarter conference call, Charter announced
that they had at least $1 billion in cash and cash equivalents (actual # was
$960,000,000), available to them. Even though Charter is not, nor soon to be,
in default the management first filed an "intent to file" Chapter 11, which
destroyed share-holder value. They then actually filed a chapter 11 which will
render Charter's current shares WORTHLESS to all but one equity holder, the
current board of directors chairman, Mr. Paul Allen.
Charter is nearing completion of one of the most extensive fiber rebuilds in
cable MSO history. They also have been heavily involved in two product
launches, high speed data and VOIP telephony, that while expensive has taken
Charter per subscriber revenue from under $40.00 per sub per month (roughly 5
years ago), to its current $108.00 per sub per month revenue. This with 5.4
million current subscribers with potential for 6.6 million more additional
subscribers, within it's current 99% complete state-of-the-art fiber network.
These build-outs and launches were expensive and had Charter CAPEX at record
levels. But, they are substantially complete. In fact, Charter had its first
FCF in history last quarter, if you take out the questionably timed and highly
subjective write-down of Goodwill that Charter foisted on the public. That
Goodwill write-down took a first ever-profitable quarter and instead turned it
into a massive (if paper) loss.
The build-out itself could have easily been paid for by an additional equity
offering by Charter at any one of many points when Charter stock was trading at
a more reasonable price, but it seems that Charter's intent was to bundle as
massive of loses as possible during the build-out phase of the company. Why you
ask? You need look no further than the favorable treatment given to one man,
Board of Director Chairman Paul Allen, with the net operating losses (NOL'S).
He has reaped billions in benefits for this treatment even though his ownership
is only 51% as compared to the 49% ownership of the rest of us.
Indeed, the entire history of Charter appears to be for the benefit of one man,
Paul Allen, at the expense of everyone else. Starting with the actual financial
structure of Charter, whose sole intent seems to be the opposite of
transparency, to allowing Charter corporate shares to be lent to CitiGroup bond
holders to be shorted as a hedge for that group (with chilling effect to
share-holder value), to no attempt to restructure a bizarre debt/equity
structure with an equity offering, to little attempt to sell non-core assets
instead of piling on more debt, to the unilateral insertion of a "Poison Pill"
provision when suitors showed an interest in Charter which would have increased
share-holder value but diluted Paul Allen's control, to his increasing
Charter's debt to also increase his benefit from the NOLS, Paul Allen has done
the opposite of his fiduciary responsibility to protect share holder value. His possible
breaches of fiduciary duty and the apparent conflicts of interest within are
legion and too many to enumerate at length here. Although Paul Allen has often
proclaimed his interests as aligned with the shareholders, his actions state the
opposite.
In spite of the attempts to run Charter into the ground, the company is actually
vibrant in many ways. There have been 10 straight quarters of double digit
revenue and RGU increases. The build-outs are almost complete and CAPEX can
soon be lowered dramatically. The company brings in over $6.4 billion in
revenue each year and without an onerous interest payment structure would be
highly profitable. There are many, many ways which Charter could correct its
current debt/equity structure outside of Chapter 11.
Re: Charter Communications Inc. on Friday filed fo
Member #: 21511
Registered: 2/13/2003
Posted:
69
Name:
Bill Karls
Name:
Bill Karls
Company:
The Bkable Group LLC
Occupation:
Owner direct sales contacting company
Location:
midwest-home offices in Madison Wis.
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