Charter still active after equity upgrade; Mirant better bid on interest; WestPoint Stevens in motion on DIP

By Carlise Newman

Chicago, June 2 - Charter Communications Inc. was one of the gainers in an otherwise subdued Monday session in distressed debt trading. Interest in Charter had been building up last week on financing talk and it remained firm Monday after an upgrade to the stock from Morgan Stanley.

Morgan Stanley equity analysts Monday raised Charter to equal-weight from underweight, saying they believe the company can restructure without filing for bankruptcy.

Charter began doing better late last week as market chatter and news reports began circulating Thursday about a bank meeting on Friday at which Charter asked senior lenders to approve a corporate structure to allow Microsoft Corp. co-founder Paul Allen to lend it $300 million.

Allen, Charter's chairman and largest shareholder, agreed in April to lend the nation's No. 3 cable operator $300 million to bolster its financial condition.

On Monday Allen agreed to delay his planned purchase of Comcast's interest in CC VIII LLC, the companies' joint cable venture.

The deal is now expected to close in June, rather than May, as had been scheduled, unless the companies agree to another arrangement, Comcast said in a press release Monday.

Charter's 8 5/8 notes due 2009 gained about a half-point on the session, up to 76 bid/77 offered, a trader said.

"Charter was a little quieter today. The financing stories slowed," a distressed debt trader said.

Also boosting the debt last week was news of an asset sale. On Thursday Charter agreed to sell its systems in Port Orchard, Washington to WaveDivision Holdings LLC in a deal valued at $91 million.

The St. Louis-based company said it expected the sale to close by the year-end.

Mirant Corp. was relatively active Monday, traders said, possibly "for lack of anything else to trade."

Mirant's 7.2% notes due 2004 traded at 85.5 bid, and were quoted at 85.5 bid/88.5 offered at the close, a half-point higher, according to a trader. Mirant's bank debt was a half-point higher, at 72 bid/74.5 offered, from 71 ½ bid/74 offered Friday.

On Friday Mirant said it had obtained an extension waiver includes a provision that limits the future use of letters of credit to existing beneficiaries in amounts not to exceed current levels.

After the market closed, Mirant announced details of its debt restructuring. The Atlanta power company will offer to exchange its existing notes at par for new notes with a longer maturity and seniority in the capital structure (See story on page one of this issue).

Earlier this month, Mirant said it was willing to offer "substantially all its unencumbered assets" as security and to agree to more stringent borrowing terms in order to restructure about $5.3 billion in debt.

Failure to refinance the debt would result in Mirant's no longer being able to continue as a "going concern," the company's auditors warned in Securities and Exchange Commission filings.

"Mirant was a mover last week, but again, like everything else, just kind of muted today," said a trader.

Meanwhile, Calpine Corp.'s bank debt moved up ¼ point to 95 bid/96 ¼ offered.

"There's no major reason for moves in oil names today. The sector is getting hot again, or at least a few of them are," said a distressed debt trader.

However, there was one company with news that affected its bonds.

WestPoint Stevens Inc. on Friday said it reached an agreement in principle with the holders of a majority of its unsecured debt on the terms of a financial restructuring that will be implemented through a filing under Chapter 11. The company has also obtained commitment for a $300 million in debtor-in-possession financing.

WestPoint's 7 7/8% notes due 2005 were quoted at 26 bid/28 offered, one point lower than last week's levels of 27 bid/29 offered.

"The bonds, which we don't see that often, are pretty much back to where they were a few weeks ago, the last time we saw them," said a distressed debt trader. "It's not one that gets that much interest usually. But it could get active for a bit now."

The company said it has arranged DIP financing a group of banks led by Bank of America and Wachovia.

The West Point, Ga.-based home furnishings company has retained Rothschild Inc. as financial advisors, and Weil, Gotshal & Manges LLP is restructuring counsel.

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