Charter's bank debt rallies on news of $1.7 billion senior notes offering

By Sara Rosenberg

New York, July 11 - Charter Communications Inc.'s bank debt headed higher by about a point to a point and a half on Friday in response to the company's announcement that it will indeed attempt to access the capital markets, proving the market rumors true.

The St. Louis cable company's term loan B was quoted at 95½ bid, 96¼ offered while the incremental loan was quoted at 95¼ bid, 96 offered, according to a trader. On Thursday the term loan B was quoted at 94½ bid, 95 offered and the incremental loan was quoted at 93 7/8 bid, 94½ offered, with both tranches up about a half a point from Wednesday's levels on rumors of some sort of convertible deal.

Charter revealed that it intends to sell approximately $1.7 billion principal amount of new senior notes.

Proceeds will be used to repay up to approximately $500 million of indebtedness under one or more of the company's subsidiaries' credit facilities and to fund the cash tender offers for a portion of the company's convertible senior notes and a portion of Charter Communications Holdings, LLC's senior notes and senior discount notes. The tender offers are intended to reduce Charter's consolidated debt and extend the maturities of its outstanding indebtedness, according to a news release.

The bank debt responded favorably to the announcement for a number of reasons including the anticipation by lenders of a paydown and the positive connotations about the strength of the market if a company like Charter is able to successfully access the capital markets for financing.

Meanwhile, there has been some speculation floating around the bank loan market that Del Monte Foods Co. may try its hand at a refinancing deal that could potentially rub some lenders the wrong way.

"Market talk is that Del Monte is going to try to refinance their term loan without paying the call protection, which is 102," a market professional told Prospect News on Friday. "They just did this deal. Part of the appeal, part of the reason they got commitments, was because there was call protection.

"B of A is restricted on the name. They can't trade it. If the agent is restricted then you know they're discussing something with the client. That's what raised suspicion. They just recently became restricted," the professional continued.

"I have to look into it. I'm not sure how they can do this. If it's a 51% issue than the revolver banks that also own term loan A might vote in favor of it for the relationship. This wouldn't be good for the market. If this were to happen I would imagine that it might lead to tranche voting for call protection."

Late in the day Friday B of A could not be reached for comment.

Del Monte obtained the $1.245 billion credit facility in December 2002 in conjunction with closing on the acquisition of certain H.J. Heinz Co. businesses.

The San Francisco processed food company's bank loan consisted of a $300 million six-year revolver with an interest rate of Libor plus 350 basis points, a $195 million six-year term loan A with an interest rate of Libor plus 350 basis points, approximately €45 million eight-year term loan B with an interest rate of Libor plus 375 basis points and a $705 million eight-year term loan B with an interest rate of Libor plus 375 basis points.

Bank of America, JPMorgan Chase, UBS Warburg, Morgan Stanley and Bank of Montreal were the lead banks on the deal.

Currently the term loan B is trading around 101 to 101¼ and the revolver is trading around 99 to 991/2, according to a trader. And the expectation is that these sellers' levels won't drop until official news is out about a refinancing transaction, should one be in the works, the trader added.

If it happens, Del Monte would just be another name added on to the list of companies that have recently decided to tap the strong primary market in hopes to lower spreads.

For example, this past Thursday, Moran Transportation launched a $175 million senior secured credit facility consisting of a $50 million five-year revolver with an interest rate of Libor plus 250 basis points and a $125 million six-year term loan B with an interest rate of Libor plus 325 basis points.

Proceeds would be used to refinance existing bank debt, which carries an interest rate of Libor plus 300 basis points on the pro rata and Libor plus 350 basis points on the term loan B, according to a syndicate source.

Fleet is the sole lead arranger on the deal and Bank of America is the syndication agent.

And of course there was AES Corp., which held a call this past Wednesday regarding a proposed $1 billion credit facility to refinance existing bank debt, some of which is priced as high as Libor plus 650 basis points, according to market sources.

The Arlington, Va. power company's facility consists of a $750 million five-year term loan B with an interest rate of Libor plus 375 basis points and a $250 million four-year revolver with an interest rate of Libor plus 375 basis points.

Citigroup, Bank of America and Deutsche are the lead banks on the term loan. Citigroup and Union Bank of California are the lead banks on the revolver.

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