pkust
join:2001-08-09
Houston, TX
| reply to quetwo
Re: Ok, we get it already
said by quetwo  :Some companies serve more rural areas, and therefore have more debt. The predicate does not necessitate the conclusion.
Regardless of the composition of the customer base, a healthy enterprise can only sustain so much debt; if it cannot generate revenues sufficient to service this debt, the enterprise will fail.
Charter's debt load, no matter the reason it was incurred, is optimistically described as "crushing". As of their most recent 10Q filing, the company has an increasingly negative net worth, with intangible assets ("goodwill") nearly double their tangible assets.
As was the case with DSL vendors such as Northpoint and Rhythms nearly a decade ago, Charter has a financial situation that is untenable: it's operating income does not come close to covering the interest payments on the debt load. To survive without a reorganization, Charter would have to immediately more than double it's operating income--a financial target that is nowhere close to realistic.
The question confronting Charter customers is what will happen during a bankruptcy proceeding. The existing assets are income-producing; strip the debt load off the company and its core financials are sound. However, companies cannot simply abandon their debt obligations (and the current climate on Wall Street is likely to make this even more difficult). Charter may well be forced into liquidation proceedings, and the assets sold off at fire-sale prices.
That Charter's customer base is more rural than urban has no bearing on the company's exceedingly grim financial reality. Charter is over-leveraged, and the de-leveraging which needs to happen will not be a painless process--not for the company, and likely not for the customers as well.
Such is the significance of a company carrying 20% of the industry's debt while servicing 8% of the industry's customers.
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Cordially,
Peter Nayland Kust
pkust@tekmedia.com
TEKMedia Communications, Inc.
www.tekmedia.com |
