Charter Communications' bank debt took a five- to seven-point hit last week after the company revealed that it received a grand jury subpoena from the U.S. district attorney's office for the Eastern District of Missouri. Following the news, small pieces of the name were said to have traded hands in the 80 1/2 - 82 3/4 range. The paper settled in at the 83 level by week's end.
The federal investigation is focused on Charter's current and disconnected customers and its policies and procedures relating to the capitalization or expense of various costs and related matters, according to a company statement. One trader, however, noted that the pressure on Charter's bank debt was not derived solely from the investigation, but also from the cable sector falling out of favor. Calls to Kent Kalkwarf, cfo, were referred to a spokesman, who declined to comment beyond the company's statement.
Recent rating agency actions did not help matters either. Moody's Investors Service changed Charter's outlook from stable to negative, although it believes the effect that a restatement of the company's historical financial results will have is likely to be minimal. Standard & Poor's was harsher, downgrading Charter's credit rating from BB to B+. The agency cited concerns over potential slower cash flow growth, as well as the effect the criminal probe will have on the company's access to the capital markets.