Deal involves 36 Systems in Seven States
On October 22, 2010, CoBridge Communications, LLC, announced it closed on the purchase of 36 cable systems in seven states serving approximately 65,000 subscribers from Charter Communications, Inc. (Nasdaq:CHTR, “Charter”). Financial terms of the transaction were not disclosed.
The systems are located in the states of Alabama, Georgia, Louisiana, Missouri, Ohio and Texas and include areas such as Ozark and Troy, Ala., Benton and Little Rock, Ark., and Corpus Christi, Texas.
CoBridge is a recently formed communications company and an affiliate of The Gores Group, a Los Angeles-based private equity firm.
CoBridge’s ceo, Scott Widham, said the company plans to upgrade the triple-play service offerings of the 36 Charter systems and also add business-class VoIP and Ethernet-based services. This will be accomplished by converting remaining one-way systems to two-way systems and increasing bandwidth through the use of digital terminal adapters for analog-to-digital conversions, according to Widham.
Charter is the fourth-largest cable operator in the U.S. ranked by basic video subscribers. Charter filed for chapter 11 bankruptcy in March of 2009 and emerged from bankruptcy in November 2009. Its common stock began trading on Nasdaq on Sept. 14, 2010.
JSICA Observations: There isn’t much information available regarding CoBridge, but, its management team comes with notable telecommunications industry experience. CoBridge’s ceo, Scott Widham, was the former co-ceo of Broadwing Communications, which was purchased by Level 3 Communications in 2007. Before that, Widham founded Capital Cable which was acquired by Charter. CoBridge’s cfo, Bruce Herman, was ceo and cfo at PrairieWave Communications and led M&A activities at Knology (Nasdaq:KNOL) for two years.
According to its website, CoBridge was recently formed to provide voice, video and broadband services with the stated goal “to purchase under-managed and under-marketed cable television communities that can be improved over time.”
CoBridge found a good target in Charter. Charter has been burdened by large debt balances for years, sapping its cash resources necessary for capital improvements. Although Charter reduced its debt by $8b through bankruptcy restructuring, it still has $13b in debt of which $6.5b comes due over the next four years. Since its current operating cash flows—roughly $2.5b annually—won’t be sufficient to service its debt and make all necessary capital improvements to effectively compete, it’s no surprise that Charter continues to unload some of its properties.