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Charter Communications Exchanges Some of Its Debt

Charter Communications is exchanging some of its debt due in 2009 for debt due in 2027, giving the company some near-term relief.

The company offered holders of the notes due in two years a higher interest rate, to 6.5% from 5.875%, for extending the due date for the debt to 2027. Most of the note holders took the company up on the offer, as the company reported that 88% of the $413 million of outstanding debt was tendered.

Charter will issue $479 million of new 6.5% notes due October 2027 for the exchange. The new notes are convertible into common stock at an initial conversion price of $3.41 per share at a conversion rate of 293 shares per bond. Holders have the option to require the company to buy back the notes in 2012, 2017 and 2022.

With more than $19 billion in outstanding debt, moving out the due dates for these notes gives Charter some breathing room in the near term. That seems imperative given the disruptions in the corporate debt markets, but Charter has insulated itself from the need to come to market for refinancing. Most of Charter’s debt does not mature until after 2010, and the company has about $400 million due in the next two-and-a-half years. Charter does have the ability to draw up to $1.4 billion under an existing credit facility to meet funding needs.

The crisis in the financial markets this summer resulted in investors becoming more risk-averse. That closed down the corporate bond and loan markets for months, particularly for companies considered to be high-risk investments or for deals backing leveraged buyouts.

Only recently have investors begun warming up to investing in such debt again, buying close to $2 billion in high-yield bonds in September and $9.4 billion in loans this week tied to the First Data leveraged buyout. However, there still remains more than $300 billion in bonds and loans waiting to come to the market, according to Fitch Ratings Service.