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Classic crash looms

Classic Communications is on the cusp of a financial disaster with the rural MSO's auditors warning that it may not be able "continue as going concern".

Such warnings are harsh and often precede a company's lunge toward bankruptcy court. After a delay, Classic filed its annual 10-K with the SEC, showing it is in violiation of its bank loan covenants, requiring a waivers from its lenders.

That's usually not life threatening, except in this case Classic also needs $148 million in new loans. Controlling shareholder Brera Partners is willing to put up $35 million of that, but as a loan rather than an equity injection that would ease anxious lenders.

Among Classic's problems: marginal growth in revenues and cash flow and a capital structure that calls for much stronger increases. Debt stands around nine times cash flow. Brera has already fired Classic's management and replaced it with other cable industry veterans. The company's stock now trades for less than $1 per share. - John Higgins