Fitch Ratings said Thursday it has placed Charter Communications Inc.'s "CCC" issuer default rating on negative rating watch, after the cable operator said it will begin discussions with its bondholders about financial options to improve its balance sheet.

Fitch said the rating watch reflects its concern that the start of those discussions increases the likelihood that the company will engage in a broad-based distressed debt exchange or file for bankruptcy.

About $21.1 billion of the company's outstanding debt as of Sept. 30 is affected.

A "CCC" rating is non-investment grade, also known as "junk."

Charter, a St. Louis-based cable TV operator controlled by Microsoft Corp. (nasdaq: MSFT - news - people ) co-founder Paul Allen, reported interest costs of $478 million for the third quarter compared with operating income of $208 million. Allen no longer works for Microsoft.

Charter's shares were trading at 13 cents apiece Thursday afternoon.

Copyright 2008 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

Fitch puts Charter on rating watch over debt woes

Fitch Ratings said Thursday it has placed Charter Communications Inc.'s "CCC" issuer default rating on negative rating watch, after the cable operator said it will begin discussions with its bondholders about financial options to improve its balance sheet.

Fitch said the rating watch reflects its concern that the start of those discussions increases the likelihood that the company will engage in a broad-based distressed debt exchange or file for bankruptcy.

About $21.1 billion of the company's outstanding debt as of Sept. 30 is affected.

A "CCC" rating is non-investment grade, also known as "junk."

Charter, a St. Louis-based cable TV operator controlled by Microsoft Corp. (nasdaq: MSFT - news - people ) co-founder Paul Allen, reported interest costs of $478 million for the third quarter compared with operating income of $208 million. Allen no longer works for Microsoft.

Charter's shares were trading at 13 cents apiece Thursday afternoon.

Copyright 2008 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

Charter Communications Inc. said Friday that it is beginning discussions with its bondholders about financial options to improve the cable operator's balance sheet.

"We believe engaging in discussions with our bondholders, aimed at improving our capital structure and enhancing our financial flexibility, is in the company's and our customers' best interests," said President and Chief Executive Neil Smit in a statement.

Last month, Charter reported it narrowed its third-quarter loss as customer sign-ups for new lines of service surged 50 percent.

But the St. Louis-based company, which is controlled by Microsoft Corp. (nasdaq: MSFT - news - people ) co-founder Paul Allen, has continued to struggle with its debt burden. It reported interest expenses of $478 million in the third quarter, eclipsing its $208 million in operating income.

As of Wednesday, Charter said it had more than $900 million of cash on hand and cash equivalents available to pay operating costs and expenses.

Charter is the nation's fourth largest cable TV operator behind Comcast Corp. (nasdaq: CMCSA - news - people ), Time Warner Cable (nyse: TWC - news - people ) Inc. and Cox Communications.

Charter's financial adviser is Lazard LLC. Charter's shares were roughly unchanged at 16 cents in morning trading.