After pulling unsecured junk deal last week, Charter returns with $1.5 billion two-part secured offer

By Paul A. Harris

Portland, Ore., June 27 – A week after withdrawing its unsecured junk bond deal because the market would not accommodate its price point, Charter Communications, Inc. took its business to the high-grade market, sources say.

Late Tuesday, in a deal run on the investment-grade desk, the Stamford, Conn.-based broadband communications firm priced $1.5 billion of senior secured notes in two tranches (Ba1/BBB-/BBB-).

The deal included $1 billion of new long 10-year notes, which priced at Treasuries plus 165 basis points, according to a market source. The deal came tight to final spread talk in the 170 bps area and inside of initial guidance in the 180 bps area.

In addition Charter priced a $500 million add-on to its 5 3/8% senior secured notes due 2047 at a 220 bps spread, tight to final talk in the 225 bps area and inside of guidance in the 235 bps area.

The latter issue came in an upsized $1.25 billion deal (from $750 million) on March 30, pricing at 30-year Treasuries plus 235 basis points.

BofA Merrill Lynch and Deutsche Bank Securities Inc. were the active bookrunners.

As with last week's pulled unsecured deal, Charter intends to use the proceeds from the secured notes for general corporate purposes including potential buybacks of the class A common stock of Charter or common units of Charter Communications Holdings, LLC.

To recap, on June 22 Charter withdrew $1.5 billion of senior unsecured notes due 2028, stating that terms and conditions available in the market were not sufficiently attractive.

Market sources said at the time that bond investors and the company were by no means close in terms of how the unsecured deal ought to be priced.

Charter was seeking to raise the $1.5 billion at 4 5/8%, but was able to generate only $1 billion of orders at 4 7/8%, according to a bond trader.

Another trader said that given initial talk of 4¾%, Charter would likely have been happy to take the deal at 4 7/8%, but apparently failed to generate sufficient interest at the higher level.

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