Moody's keeps Charter liquidity at SGL-4

Moody's Investors Service said for Charter Communications Inc.'s speculative-grade liquidity rating remains SGL-4.

Moody's said the SGL-4 rating indicates its belief that Charter's liquidity profile for the next 12 months is somewhat weak, stemming mainly from Moody's expectation that the company may be unable to comply with financial covenants under at least one of its bank credit facilities in 2004.

This opinion is grounded in Moody's expectation that the company will continue to generate negative free cash flow over this period, albeit at potentially less significant levels based on continued reductions in projected capital investment, which in combination with scheduled step-downs of a fairly dramatic nature in covenanted maintenance financial leverage levels for the Falcon bank credit facility in particular, considerably reduces the former cushion and creates added uncertainty.

While the company has adequate committed facilities in aggregate to fund its free cash flow short fall, the recent cancellation of its planned refinancing and tender activities heightens the possibility that it could lose access to a substantial portion of these facilities as a result of potential covenant violations, specifically in that the scheduled $500 million reduction in revolver outstandings with proceeds from the formerly proposed financing that would have otherwise provided better assurance of prospective covenant compliance has been cancelled.

Moody's continued to note, however, that some flexibility remains in the form of the $300 million backstop liquidity facility from Paul Allen's Vulcan subsidiary, the commitment for which was put in place expressly for the purpose of aiding in the company's efforts to remain compliant with all bank covenants inclusive of some built-in cushion, if needed.

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