Charter Communications Inc. has emerged from Chapter 11 bankruptcy with only $13 billion in debt. Charter filed bankruptcy in March with $21.7 billion of debt. Their bankruptcy plan has wiped out $8 billion of debt and reduced their interest costs to $830 million a year.
Bondholders who exchanged $8 billion of debt end up owning substantially all of the newly reorganized company. Allen's majority stake will be reduced to 2 percent. But he will have 35 percent control of all votes - making his the largest voting interest in Charter - and gets to appoint four directors to the board.
Charter has stated that because of the successful bankruptcy exit, it plans to post positive cashflow and see a profit for the first time since 1999. Charter's bankruptcy plan has been one of the most contested bankruptcy filings ever with a group of lenders led by JPMorganChase & Co., stockholder R2 Investment LDC and Law Debenture Trust Co. of New York, a trustee for holders of $479 million in bonds challenging the bankruptcy plan and even seeking to delay Charter's exit from Chapter 11 bankruptcy. Their appeal to delay the bankruptcy exit has failed but it is not clear if they will continue other legal avenues.
For businesses filing Chapter 11 bankruptcy, gathering the support and approval of the bankruptcy plan from important creditors before a bankruptcy filing can be a powerful strategy. And if a company wants to avoid liquidation it may be an essential ingredient to their bankruptcy strategy especially if they have several creditors who may not be in agreement on what path they should take to exit bankruptcy.