Cable sector continues decline with Charter leading the pack

By Sara Rosenberg

New York, June 13 - The cable sector declined further Thursday, with Charter Communications Inc.'s bank paper showing the most noticeable fall.

Over the past couple of days, the cable sector as a whole has experienced some weakening due to unfavorable stories surrounding Adelphia Communications Corp. However, on Thursday, Charter was worst affected. Previously, Charter's bank loans have declined by about half a point a day but Thursday's drop was estimated at 1½ points, according to a market professional. The St. Louis, Mo. cable company ended the day with a bid of 911/2, but it traded as low as 91 during market hours, a trader said.

Furthermore, Charter's bonds went down a couple of points as well, the professional said, while the company's equity seemed to perform "OK."

Charter's performance is "all technical driven," a trader said.

"There's delayed cable cross-contamination going on," the professional explained. "People want to take their exposure down in cable and Charter is a bigger credit so it will go down faster. Some big institutions must be making generic decisions. [Also], some say that Charter hasn't been as emphatic [as other cable companies] in saying that they don't have accounting issues so people wondered if there are issues there."

Some other cable names that have fallen recently include Insight Communications Co., a New York, N.Y. cable company, and Mediacom Communications Corp., a Middletown, N.Y. cable company. Both companies were previously trading over par "and now they're just nudging par", the professional said.

Meanwhile, the impetus behind the cable sector's decline, Adelphia, continues to see a steady softening in its bank loan paper. The Olympus loan was being offered at 88 and experienced some trades as low as 83 on Thursday, according to a trader. The Century loan traded as low as 80, he added.

"Century is the weakest subsidiary," the market professional said.

On Monday, after Century Communications Corp. filed for bankruptcy protection under Chapter 11, the Century loan dropped to a bid of 77 and an offer of 80. The Olympus loan fell as well, with the bid at 88 and the offer at 90.

Historically, the Adelphia Century loan has traded lower than the Olympus loan due to the fact that it's a better credit, according to market professionals. For example, on Friday, while Century was trading at 85, Olympus was trading at 92.

Coming up in the primary next Thursday is Berry Plastics Corp. bank meeting regarding its new fully secured $455 million credit facility, which will be used to fund the company's purchase by GS Capital Partners 2000 LP and repay outstanding debt, according to a syndicate source. Goldman Sachs and JPMorgan Chase are the lead banks on the deal.

The Evansville, Ind. injection-molded plastic company's loan consists of a $100 million six-year revolver with an interest rate of Libor plus 275 basis points, a $50 million six-year delayed draw term loan with an interest rate of Libor plus 275 basis points and a $305 million eight-year term loan B with an interest rate of Libor plus 325 basis points, the syndicate source said. There is a 50 basis points commitment fee on the revolver and a 75 basis points commitment fee on the delayed draw term loan.

"Spreads have gotten tighter and upfront fees have gone away," a market professional said. "A BB-ish credit at plus 225 to 250 basis points will get done. Until LBO's get going again people don't have much of a choice."

"Their total leverage is a little high," a second professional said. "Let's see if frothiness in the market is enough to get it done. My guess is that it is."

In other news, market talk is that Sinclair Broadcast Group Inc. is refinancing its existing credit facility with a new $600 million bank loan. The Hunt Valley, Md. television broadcasting company's loan is said to consist of a $225 million revolver with an interest rate of Libor plus 225 basis points and a $375 million term loan B with an interest rate of Libor plus 225 basis points. JPMorgan Chase is said to be the lead bank on the deal. Neither the company nor the syndicate was immediately available to confirm the information.

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