THE CLOCK IS TICKING

BY MAVIS SCANLON

In early December, after months of turmoil, Charter Communications appointed cable veteran Maggie Bellville to the position of EVP of operations. Job No. 1 was to oversee a sweeping reorganization of the ailing company. Significant layoffs were to ensue, and with those layoffs were to come significant cost savings. Charter said the savings would be outlined when the company reported its fourth-quarter results in February of this year.

February has come and gone, with no indication from Charter on when those results will be released. Now, the March 31 deadline for issuing annual financial reports is looming, and that's got Charter's investors worried. According to SEC regulations, companies have 90 days from the close of a fiscal year to issue their annual reports, or 10Ks. Due to an ongoing audit of 2000 and 2001 financial results by KPMG, its newly hired auditor, which also is auditing the entirety of 2002's results, the company has been unable to guarantee jittery shareholders and bondholders that its 2002 10K will be filed on time.

Nor has the MSO scheduled a date for the release of fourth-quarter earnings, which, given its precarious stock and bond prices and the questions swirling over its financial position, is highly anticipated.

Dave Andersen, a spokesman for Charter, says the bulk of his time these days is spent fielding calls on when earnings will be out and whether the 10K will be filed on time. ?We've got till March 31 to report,? he says. ?I don't have any indication that we're not going to make that deadline.?

Operations-wise, Andersen says Charter had a ?good January and a better February.? Bellville has been making progress in beefing up management, with appointments being finalized and announcements expected soon, he adds.

Nervousness over the financial reports is clearly warranted. If Charter misses the March 31 deadline, covenants on its bank and bond debt give it a 30-day grace period to file the report. Failure to meet that deadline will trigger automatic defaults of some $17 billion in bank and bond debt. Due to restrictive covenants that govern the bulk, if not all, of Charter's credit facilities, long-term debt and convertible senior notes, that would set in motion a daisy chain of additional defaults; and that would result in Charter facing accelerated debt repayments.

That's about the last thing the company needs right now. As of Sept. 20, Charter's total debt was $18.5 billion, including $7.7 billion in bank credit facilities issued to subsidiaries, $9.4 billion of high-yield debt and $1.4 billion in convertible senior notes.

?The implications of a potential delay are significant,? says Aryeh Bourkoff, an analyst at UBS Warburg, who follows Charter's debt and equity.

For some time now, analysts have expected Paul Allen, Charter's founder and majority shareholder, to step in and initiate some sort of debt restructuring. However, Allen is said to be waiting until pending investigations by the Department of Justice and SEC are completed.