Charter Communications' disclosure statement OK'd; plan confirmation hearing set July 20

By Rebecca Melvin

New York, May 5 - Charter Communications Inc.'s disclosure statement was approved Tuesday by the U.S. Bankruptcy Court for the Southern District of New York, following the addition of supplemental information to satisfy objectors' concerns.

A plan confirmation hearing was set for July 20.

Amendments since the original pre-packaged filing, including financing commitment fees, were outlined by counsel for the company.

Commitment fees, including a $49 million equity backstop fee for a $1.6 billion equity backstop, were approved.

Charter's pre-packaged plan is supported by controlling shareholder Paul G. Allen and his affiliates, as well as by holders of about 73% in principal amount of the 11% senior secured notes due 2015 of CCH I, LLC and about 52% in principal amount of the 10¼% senior notes due 2010 and 2013 of CCH II, LLC, according to a company release.

Of seven objections and one reservation of rights, all were resolved through the addition of supplemental information, although several of the objections are expected to resurface at plan confirmation, specifically those dealing with the issue of reinstatement that is being litigated by JPMorgan Chase Bank NA, the administration agent for prepetition lenders.

Three objections including those from JPMorgan and the third-lien agent, wanted more information on reinstatement. Two litigant objectors, including Rembrandt Technologies, wanted more information on those litigations added to the disclosure statement.

The creditors committee objected to the rights offering and equity backstop, and additional language on those topics was added to the disclosure statement.

Of modifications made to the rights offering procedures, most significant is that if a creditor elects to participate, then that creditor will get any interest earned on that amount.

Holders of Charter's 6.5% convertible notes objected because they were seeking more information on intercompany claims, the settlement with controlling shareholder Paul Allen, tax issues, and their own settlement

Counsel for those noteholders, Gerald Uzzi of White & Case LLP, said the company has agreed to hold further discussions with noteholders about their settlement, which amounts to only a fixed 19 cents of recovery. The noteholders hold $479 million of debt.

Uzzi told the court that the noteholders didn't want the fact that they had stepped aside on approval of the disclosure statement to be misconstrued as the noteholders being satisfied with the plan.

"We are the only class of creditors that are taking a substantial haircut. Everyone else in the deal is part of the deal, or being paid in full on reinstatement. Reinstatement isn't the only issue in this case," Uzzi said.

JPMorgan complaint taken under advisement

The company's motion to dismiss JPMorgan's adversary proceeding against Charter related to the issue of reinstatement was taken under advisement by judge James Peck.

"I find that this litigation is core; and I will prepare, in due course, a memorandum of decision that lays out the reasoning and conclusion I have reached. It will be timely relative to the confirmation hearing," Peck said.

He said he would give no indication as to how he would rule, but said it was appropriate for the parties to know that he would thoroughly document his finding, in particular because JPMorgan may seek appellate review in the case.

"I find the arguments made by each side to be balanced and because the contract provisions are complex and the language gets less clear on second reading, I am taking this matter under advisement," Peck said.

JPMorgan is the administrative agent for prepetition first-lien secured lenders. In the lenders' complaint, they said Charter has borrowed more than $8.2 billion under a prepetition credit agreement, which includes a $6.5 billion term loan with maturity of March 6, 2014; a $1.5 billion revolving credit facility that matures March 6, 2013, including the availability of letters of credit totaling $350 million; and $500 million of incremental term loan financing.

In addition to reinstatement, JPMorgan objects to the plan's change-of-control and acceleration provisions.

From the company's perspective, "JPMorgan is fishing for a standard to be applied to a contract," Charter counsel told the court.

Counsel said that the banks were not monetarily harmed since Charter made every payment prior to bankruptcy, including a February payment.

"But they still allege a default at some point in the future," counsel said.

Charter Communications is a St. Louis-based provider of video services, high-speed internet services and telephone services to residential and commercial customers on a subscription basis. The company filed for bankruptcy on March 27. Its Chapter 11 case number is 09-11435.

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