The US Bankruptcy Court for the Southern District of New York received deserved attention for its decision allowing Charter Communications to reinstate its first lien debt through a plan of reorganisation. The decision approves of the heretofore controversial practice of debt reinstatement, providing favourable precedent for debtors seeking to deliver their balance sheet by equitising junior debt while reinstating existing senior debt on the more favourable original financing terms.
Charter Communications is the fourth-largest cable TV operator in the US. As of December 2008, it had approximately $13.9 billion in assets and $21.5 billion in long-term debt. Charter filed Chapter 11 petitions on March 27 2009 pursuant to a pre-arranged plan of reorganisation that the Bankruptcy Court described as “perhaps the largest and most complex pre-arranged bankruptcies ever attempted, and in all likelihood rank among the most ambitious and contentious as well.” The plan’s central component was the reinstatement of...