Charter junks plan

Allen cabler nixes $1.7 bil bond offering

NEW YORK — Charter Communications was forced to abandon plans to raise some $1.7 billion in junk bonds, citing “unfavorable conditions” in the high-yield market.

The funds were intended to refinance part of the Paul Allen-owned cabler’s mountainous $19 billion debt load. But investors were clearly wary of the risk, and by midday Wednesday the company had been forced to raise the yield on the bonds, before deciding to withdraw the offer altogether late Thursday.

Ratings agency Moody’s had assigned the bonds its seventh-lowest junk bond rating, and analysts said competition from higher-rated junk bond offerings ate into the demand for the new Charter debt.

Charter has some $1 billion in bonds that will come due in 2005 and 2006, which it does not have cash on hand to redeem. Credit rating agencies are also concerned that its operations may not be throwing off sufficient cash to meet the interest payments.

The company is still stuck in legal and financial purgatory after a federal probe into its accounting policies. Several former execs were recently indicted on accusations of falsifying subscriber numbers, and a new management team has since been working to turn the operation around.

In a statement, Charter prexy Carl Vogel said the company “will revise this and other transactions as market conditions improve.”

Company is under pressure to refinance its debt to avoid a wholesale restructuring of the firm.

In its review of Charter’s proposed offering, Moody’s warned that the re-financing effort would “fall far short of rectifying the considerable imbalance that has existed and remains between the company’s operating and financial profiles.” Moody’s also noted the risk of “lingering uncertainties about management’s ability to meaningfully improve operations” and limited financial flexibility.

Still, Charter has among the highest level of upgraded cable assets of any cable operator and its SEC and DOJ investigations are believed to be near conclusion.

Stock rose 4% to $3.75 on thin trading Friday.