Charter Communications, Inc. (NASDAQ:CHTR)

On January 26, 2012 we removed CHTR from the GeoSpeicial List @ 59.55

Added to the GeoSpecial list on March 15, 2010 @$33.00.  Also see intial our research note on March 10, 2012. 

Peak performance: Reached a high of  $61.15 on April 29, 2011 for a maximum potential return of 72.5%.

Catalyst: Exited Chapter 11; Company reduced debt by around $8 billion; Company reduced expense by over $800 million; Uplisting to a major exchange was imminent.

Current road block: At its current price CHTR is trading at forward P/E of 34.8 on 2012 EPS estimates of $1.67 .  We are still considering retaining some exposure to CHTR. Adjusted EBTDA is tracking at about $24.22. Historically, companies that operate in CHTR's industry have traded as high as 6 times EBITDA. This would translate into a potential price target of $145.

Current Price: $58.17

Today, GeoSpecial Charter Communications announced the that it:  "received the required votes from lenders to amend its existing $8.177 billion senior secured credit facilities to, among other things, allow for the creation of a new revolving facility, the extension of maturities of a portion of the facilities and the amendment of certain other terms and conditions. As a result, CCO expects to extend approximately $3 billion of existing term loan maturities to September 2016, a two-and a half year maturity extension from the existing term loan maturities."

We are hoping that this will alleviate the uncertainty surrounding this issue and reduce the risk premium embedded in CCMM shares.

Source: PR Newswire (March 17, 2010)

The GeoTeam® has nibbled at CCMM. We noticed some big trades $2.35 below the bid. We refer to this as reverse raisers; wiping out a seller. Over the years this type of price action has indicated a bullish short-term signal for the GeoTeam®.

We performed further due diligence and it appears that the company reported 2009 non-GAAP EPS of around $10.00. Combining this revelation with EBITDA per share of around $20.00 and the following facts has prompted us to code CCMM as a high risk GeoSpecial:

• The Company has reduced debt by around $8 billion
• The Company has reduced expense by over $800 million
• Uplisting is imminent
• Per its fourth quarter conference call, the Company has Expressed Confidence about the future: “in its Better position than ever to compete.”

We will track Charter as it  emerged from Chapter 11 on November 30, 2009.  Coding as GeoSpecial on the radar.

We are not sure if this restructuring story has legs. It requires more due diligence.  EBITDA is $21.00 per share, but we are still attempting to get a grip on EPS. The Company has applied to NASDAQ to list its Class A common stock and believes it will be in a position to complete the listing of its upon filling the vacancy on its board of directors and audit committee.

As part of the terms of the reorganization plan debt holders received five warrants with exercise prices of $46.86 and $51.28. We found it interesting that the warrants are trading at a pretty hefty premium....

CCHJW: $4.25

CCMMW: $6.00

leading us to believe that there is a degree of optimism that the common shares, currently at $33.00, will appreciate significantly.  Today, we actually observed a 50k share block on the ask for CCMMW.

Shares of CCMM have fallen well off their high, so we may be over thinking this.  But we are speculating that  the decline may have to do with uncertainty over the company's ability to extend its credit line.  CCMM is now in the midst of addressing this issue. We will watch closely.