Paul Allen's cable nightmare: Apollo gets its claws into Charter

While Charter produces a good amount of cash flow, it's not enough to deal with the current recession and tight credit markets (the debt load is a crushing $21 billion). As a result, the firm is attracting interest from vulture investors, such as Apollo Group (NASDAQ: APOL) (which is a top private equity firm). This is according to a report from Reuters.

Basically, the plan is for Apollo to take control of Charter, giving Allen about 35% of the remaining voting control. Interestingly enough, Charter is already working through a prepackaged bankruptcy restructuring.

Over the long term, this could be a nice deal for Apollo -- as the debt structure is likely to get rationalized. And, for the most part, the firm got into this position with savvy purchases of Charter bonds. Thus, Apollo can swap its debt for equity.

And expect more deals like this. After all, Apollo expects to devote 25% of its $15 billion in assets on distressed plays.

Tom Taulli is the author of various books, including The Complete M&A Handbook, and the founder of BizEquity, a free online business valuation tool for small businesses. You can reach him on Twitter.