How do you lose $7 billion?
Originally Posted by forumreader
No Charter news from anyone ?
by The Associated Press
Wednesday January 28, 2009, 1:56 PM
That's a question for Microsoft Corp. co-founder Paul Allen, who has seen his massive investment in cable TV operator Charter Communications Inc. all but vanish.
Charter was Allen's biggest investment after he left Microsoft in 1983. He is Charter's chairman and holds a 51 percent stake in the company, which is the nation's fourth-largest cable operator, with 5.5 million customers in 27 states, including Oregon.
But the stock is now 8 cents per share, down from an all-time high of $27.75 reached a few days after its initial public offering in 1999. The St. Louis-based cable company is facing bankruptcy, analysts said.
Allen wouldn't comment, and neither would Charter, other than a statement from Chief Executive Neil Smit, who said the company is continuing to negotiate with its bondholders. Analysts said Charter is likely to try rolling over its debt into new loans payable later, or swapping its debt for equity in the company.
Charter has been skirting insolvency for years, but this time it faces a brutal combination of tight credit and billions of debt coming due.
The company missed a debt payment this month, and about $1.9 billion of debt comes due next year. Overall, more than half of Charter's $21 billion in total borrowings will mature by 2013.
Tuna Amobi, an analyst with Standard & Poor's, doesn't think it likely that Allen will pump in more money. And selling off assets would be tough, because Charter is unlikely to get a good price in this down market. Charter itself acknowledged in a Securities and Exchange Commission filing that if it can't refinance its debt, it could be forced to seek bankruptcy protection.
Allen, 56, who started Microsoft with Bill Gates in 1975, once ranked as the world's third-richest person, with a $30 billion fortune in 1999, according to Forbes magazine. But he has had a mixed record as an investor, which is reflected in his decline on the Forbes rich list. Last year Allen was No. 41, with an estimated $16 billion in holdings.
Allen has plowed his money into such diverse targets as DreamWorks SKG, The Portland Trail Blazers, the Seattle Seahawks and the Science Fiction Museum and Hall of Fame. He had success with USA Networks and CNET, and failures with Priceline, Egghead.com and online retailer Value America. But Charter may be his biggest disappointment.
Allen's vision for his cable holdings began with high hopes. In the spring of 1998, he bought Marcus Cable Co. for $2.8 billion, and a month later he paid $4.5 billion for Charter, which would eventually acquire Marcus.
At the time, he said: "For over 20 years, I have been talking about and investing in the 'wired world,' a connected future marked by the merger of high-bandwidth data channels, the power of the personal computer, and the availability of compelling content."
"I will finally have some wires for my wired world," he later added.
But Charter has never made a profit since at least 1999, when it went public. Its earnings were wiped out by large interest payments on the debts it incurred largely in the acquisitions it used to expand.
Some of Allen's dreams for the cable business were shared by Gates. Microsoft invested $1 billion in Comcast Corp. in 1997, which went on to become the nation's biggest cable company. Five years later, Microsoft got even more Comcast stock in exchange for its $5 billion stake in AT&T Broadband, which Comcast bought.
But cable seems to have lost its allure for Gates - Microsoft recently liquidated all of its shares in Comcast. Now it might well be the same for Allen.
- The Associated Presshttp://www.oregonlive.com/business/i...7_billion.html