Allen’s cable is fraying
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Billionaire Paul Allen is in danger of getting his cable cut off.
The Microsoft co-founder may lose control of bankrupt cable company Charter Communications after talks with the company’s senior lenders to restructure the firm’s massive debt load appear to have broken down, according to sources on both sides.
That leaves Allen at the mercy of a US Bankruptcy Court judge, who is expected to rule on the reorganization Sept. 30.
Allen had pinned his hopes on teaming up with bondholders to restructure Charter’s $22 billion debt load in a way that doesn’t leave him personally on the hook for $1 billion in taxes, while keeping voting control.
Under his plan, Allen has joined with Leon Black’s Apollo Management and a group of bondholders to reorganize the business so that Allen maintains four of 11 board seats, a 35 percent stake and a small economic interest.
The billionaire also stands to collect several hundred million dollars and a release from any Charter-related lawsuits.
However, a JPMorgan Chase-led bank group has objected to that plan, arguing the restructuring represents a change in control as Allen’s true influence over the company through his stock holdings would be mostly wiped out.
The banks would be willing to overlook this sticking point in exchange for Charter paying a higher interest rate on its debt — at a level the bondholders have refused to entertain, according to sources.
The bondholders need Allen because by teaming with him they can argue the reorganization is not a change of control, enabling the company to pay the senior lenders at the current interest rate, which is below market rates.
Allen has invested about $8 billion in Charter.
With talks at an impasse, Allen’s best hope rests with Bankruptcy Court Judge James Peck, who has openly questioned Allen’s role in the reorganization.