A unanimous panel of the U.S. Court of Appeals for the Second Circuit has affirmed the dismissal of a suit by two creditors challenging the recent Chapter 11 reorganization of Charter Communications Inc., ruling that the challenge is equitably moot because the reorganization has already been substantially consummated.
Charter, the nation’s fourth-largest cable company, filed for Chapter 11 in 2009 with a prearranged reorganization plan. The plan was set up to avoid having to renegotiate its senior debt, which was held by JPMorgan Chase. One condition of Charter’s credit agreement was that its controlling shareholder, investor and Microsoft founder Paul Allen, would retain a 35 percent voting stake in the company. In order to induce Allen to hold onto his shares, even though their value would be wiped out by the bankruptcy, Charter and its junior bondholders agreed to a settlement that would give Allen $375 million.
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