Paul Allen to control 35 pct Charter voting rights

Microsoft co-founder Paul Allen will see his majority stake in struggling cable operator Charter Communications Inc. wiped out in a pre-arranged bankruptcy, but a deal with his debt holders will give him a 35 percent voting control in the newly reorganized company.

The chairman of St. Louis-based Charter also will get the right to nominate at least 35 percent of the board, according to filings with the Securities and Exchange Commission late Friday.

On Thursday, Charter disclosed that it expects to file for bankruptcy by April 1 and get relief from creditors. Holders of $8 billion of debt agreed to swap their debt for nearly complete ownership in the new company, and certain old debt was exchanged for new debt.

After bankruptcy, Charter will still have $13 billion of mostly bank debt, expiring from 2013 to 2016.

Charter, which has never made a profit since it went public in 1999, has struggled with a big debt load amassed through a string of acquisitions to build up the company. Charter, the nation's fourth-largest cable company, serves 5.5 million customers in 27 states.

Charter's chief executive, Neil Smit, and chief operating officer, Michael Lovett, will stay with the company after the restructuring.

Allen will receive Class B common shares, seven-year warrants to buy new Class A common shares, $175 million in cash, new debt worth around $85 million, up to $20 million in reimbursement of fees and expenses related to restructuring and retain a 3 percent equity stake in Charter Communications Holding Co. LLC.

In the bankruptcy, Allen's 51 percent equity stake in the cable operator will be wiped out, along with shares of other stockholders. Allen also holds some debt and preferred stock.

Shares of Charter fell about a penny to 2.9 cents on Friday.

(This version CORRECTS Allen will retain a 3 percent equity stake)

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