Difficult market conditions continue to take a toll on a number of struggling companies, as Patriot Capital Funding Inc. warned that it is expecting its accounting firm to express “substantial doubt” about the specialty-finance company’s ability to continue as a going concern. Also, cable company Charter Communications reported a December-quarter loss of $1.5 billion in advance of its expected prepackaged bankruptcy filing.
Patriot Capital Funding, which specializes in loans and other financing to small- to mid-sized companies, said that while it is in compliance with the terms of its credit facility, the uncertainty to cited by its accountant would reflect uncertainty surrounding the renewal of a liquidity facility.
It said that it is currently negotiating the renewal of its liquidity facility, which matures in April, and which supports its credit facility with its lenders. “In the event that our lenders do not renew the liquidity facility, the terms of the Credit Facility require that all principal and interest collected from the debt investments secured by the Credit Facility must be used to pay down amounts outstanding under the Credit Facility by April 2011,” it said. Because substantially all its debt investments are secured by the credit facility, Patriot conceded it cannot provide any assurance it would have sufficient cash and liquid assets to fund normal operations and dividend distributions during the time it is required to repay the facility if the amounts became due.
In Charter’s case, the company had announced plans to file a prepackaged bankruptcy on April 1. But in reporting the $1.5-billion quarterly loss, compared with a year-earlier loss of $468 million, it also warned one of its subsidiaries will not make an interest payment on March 16 on certain senior notes. The unit in question is CCH II LLC. The governing indenture for the notes permits a 30-day grace period for the interest payments.
Under its agreement with bondholders, Charter said it expects to make its voluntary Chapter 11 filing prior to the expiration of the grace period. Charter mostly attributed its quarterly loss to a $1.521 billion impairment charge for its franchises.
Meanwhile, Dana Holding Corp., the struggling auto parts company that emerged from bankruptcy last year, reported that sales for the fourth quarter of 2008 plunged 29 percent to $1.5 billion. Sales were impacted by both sharply declining North American vehicle production and unfavorable currency changes, it said. Fourth-quarter EBITDA was a negative $3 million, compared to $112 million for the same period in 2007. “The impact of lower vehicle production drove the reduction in earnings,” the company said. “This decline was partially offset by higher pricing and cost savings from operational improvements.”