Charter Files For Prearranged Bankruptcy

The cable operator racked up massive amounts of debt as it grew through acquiring cable systems. For years the company has ducked insolvency, but it is now coming up against tight credit and billions of dollars of debt coming due.

On Friday, Fitch Ratings downgraded its issuer default rating on Charter and its subsidiaries to "D'' — its lowest rating and indicates bankruptcy — from "C." The rating measures Charter's vulnerability to defaulting on its debt. Fitch also affirmed certain senior unsecured, senior secured and convertible senior debt.

It also raised its rating on some credit facilities due to definition changes at Fitch and unrelated to the bankruptcy. The actions affect $21.7 billion of debt.

While the bankruptcy does provide relief, it remains to be seen whether Charter can finally post a net profit with a smaller debt load during a recession.

"That's the question," said Matt Dundon, an analyst at Miller Tabak Roberts. "It really depends on what your expectations are of the development of cash flow in the business."

Charter is bullish: It expects to post free cash flow of $500 million in 2010.