Charter Communications, Inc. (CHTR)

BShaw010 (< 20) Submitted: 10/23/07 3:57 PM : Start Price: $2.49 CHTR Score: 44.00

There is one key reason that this stock will underperform. It isn't bad customer service or competition, although those pressures certainly aren't helping.

The key to this company's demise is its debt. $19 billion dollars of it!!!

Just to put this number in perspective, total assets for Charter at 12/31 were $15 billion, or $4 billion less than its long term debt! In 2006, interest expense from this debt turned operating income of $400 million into a net loss of $1.4 billion.

Here's exactly how this debt is killing Charter:
1) $1.9 billion in interest expense last year
2) This debt is maturing; re-financing the debt is costing Charter upwards of 10% in interest rates
3) $19 billion in debt is so extreme that it has scared away every single potential buyer of the company

The bottom line here is that Charter can't even afford to hold its head above water with this weight dragging it down. Look for the company to file bankruptcy and have its assets bought out in the next few years.

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