Lenders squeamish on Charter debt plan
Wells Fargo has become the second large lender to Charter Communications objecting to an element of Charter’s Chapter 11 re-organization plan.
The bank says Charter's attempt to reinstate $11.8 billion of debt appears too risky and therefore likely to fail, according to Reuters, which reviewed court documents that Wells Fargo filed on Wednesday.
If the company is unable to reinstate its debt, Wells Fargo said Charter's interest payments will increase by more than $500 million annually, as it will have to re-price its debt at significantly higher interest rates.
Wells Fargo appears to be simply acknowledging the potential effects of a suit previously filed by JPMorgan (story here).
JPMorgan filed suit on behalf of itself and other holders of $8.5 billion in Charter’s senior debt (more than one-third of the company’s total debt), charging Charter with violating its loan agreements and asserting that the debt cannot be reinstated.
Charter's official committee of unsecured creditors filed a motion to intervene in the dispute with JPMorgan on Thursday, saying JPMorgan had started the litigation “in an apparent effort to create a roadblock to reinstatement of the outstanding debt,” Reuters reported.
Charter has also filed a motion to dismiss JPMorgan's complaint.