Charter Charts a New Course in Bankruptcy

After reaching a debt restructuring agreement with top shareholder and Microsoft (MSFT Quote) co-founder Paul Allen and its bond holders, Charter(CHTR Quote) filed for Chapter 11 protection Friday.

The nation's No. 4 cable shop says it entered a $3.5 billion debt and equity agreement with its bondholder committee allowing the failed St. Louis-based company to refinance its debt and fund its operations. The so-called pre-arranged restructuring deal calls for as much as $2 billion in equity proceeds, $1.2 billion in roll-over debt and $267 million in new debt to cover the refinancing.

Last month, the company signaled its intentions to work out a deal with creditors and updated those plans as private equity firm Apollo looked to swap its large debt position into stock as part of the restructuring.

"The financial restructuring is good news for Charter and our customers and, if approved, will result in Charter being better positioned to deliver the products and services our customers demand now and in the future," CEO Neil Smit said in a press release.

Earlier this month, Smit and his management team secured an incentive pay package to stay on to steer the company through the restructuring. Smit's agreement calls for as much as $8.5 million in award pay.

Crushed by $21.7 billion in debt, Charter ended the year unable to pay $2.6 billion in what it called "fixed charges," and booked a grand total of $2.4 billion in losses in 2008.

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