Moody's downgrade chops Charter stock
Co. cites 'the growing probability' of expected losses
Moody's cut Charter's credit and debt ratings deeper into junk-bond range, citing "the growing probability" of expected credit losses associated with an increasingly likely debt restructuring. Moody's also noted a worsening operating performance relative to other cable operators in recent months, particularly with falling sub numbers and cash flow.
Moody's verdict simply added fuel to the fire for a company struggling to regain financial footing after earnings warnings, exec dismissals and a continued Justice Dept. investigation into how it accounted for subscribers and disconnects. The Paul Allen-backed multisystem operator has been working to contain costs, but in so doing has been forced to scale back on marketing, thus limiting its ability to stem churn and add digital customers.
Moody's doesn't believe the company will be generating positive free cash flow until 2005 and has suggested the company must shed at least $5 billion of its untenably high debt load.
Charter is the third-largest MSO in the U.S., with 6.7 million subs. Its senior unsecured issuer rating was cut from "Caa2" to "Ca," Moody's second-lowest grade, while senior unsecured notes plummeted to "Ca" from "B3." The agency also reduced Charter's liquidity rating to its lowest level, "SGL-4" and maintained a negative outlook pending improved operating performance, the resolution of KPMG's reaudit and conclusion of the DOJ probe.
