Charter half a point higher; Peabody firm on earnings; Levi's unchanged as market awaits clarity

By Sara Rosenberg

New York, April 16 - Charter Communications Inc.'s term loan B traded a tad higher in an otherwise quiet secondary bank loan market. Meanwhile, Peabody Energy seemed firm but unchanged following the release of positive earnings news and quotes on Levi Strauss & Co. seemed unchanged but hard to read as the market waited for further information on the allegations of tax fraud.

Charter traded at 91, compared to a trading level of 90½ on Tuesday, according to a trader.

On Tuesday, the St. Louis cable company revealed that effective April 14, Charter entered into a commitment letter with Vulcan Inc., an affiliate of Paul Allen, under which Vulcan would lend Charter Communications VII, LLC up to $300 million. This credit facility includes a subfacility of up to $100 million for the issuance of letters of credit, according to a filing with the Securities and Exchange Commission.

Peabody Energy's term loan B was quoted with a par ½ bid, par ¾ offer, basically unchanged from Tuesday's levels despite the release of favorable earnings news.

"It's pretty high as it is so I don't think it will move much higher," a trader explained.

The company reported income of $20.2 million, or $0.39 per share, before $21.2 million in early debt extinguishment charges and $10.2 million in charges related to the cumulative effect of accounting changes for the quarter ended March 31. Including these items, the company reported a net loss of $11.2 million, or $0.21 per share. EBITDA of $97 million, compared to $113.7 million in 2002, exceeded first quarter targets of $80 to $90 million. Revenues of $681.2 million were comparable with the prior year.

"The first quarter was highlighted by better-than-expected results and the early refinancing of Peabody's debt in a favorable environment," said Irl F. Engelhardt, chairman and chief executive officer, in a news release. "We expect markets to continue to improve throughout the year, increasing capacity utilization and earnings in the second half."

Peabody recently refinanced its debt with a new $450 million seven-year term loan at an interest rate of Libor plus 250 basis points, a $600 million five-year revolver at an interest rate of Libor plus 200 basis points, which is currently undrawn except for letters of credit usage, and $650 million in 10-year senior unsecured notes at 6.875%.

Lehman Brothers and Wachovia were the syndication agents, Fleet was the administrative agent and Morgan Stanley was the documentation agent on the St. Louis coal company's new loan. Lehman Brothers and Morgan Stanley were joint bookrunners on the bond offering with CIBC World Markets, JP Morgan, Fleet Securities and Credit Lyonnais acting as co-managers.

"Peabody's refinancing increases our ongoing earnings and improves our ability to implement our growth strategies," said Richard A. Navarre, executive vice president and chief financial officer.

The outlook for 2003 includes EBITDA in the range of $405 to $415 million and full-year earnings in the range of $1.40 to $1.55 per share

Levi Strauss' term loan B was quoted around 94 bid, 96 offer, a trader told Prospect News, adding that the paper was pretty much unchanged after Tuesday's drop by a couple of points. On Tuesday, a different trader quoted the paper at 95 bid, 97 offer.

Asked about the slight discrepancy in levels, the trader responded, "There's no clear direction since the paper hasn't traded at all."

"People are just trying to figure out what's going on," another trader explained, adding that until matters become clearer there won't be much activity in Levi's bank debt.

On Tuesday, The San Francisco Chronicle printed an article stating that two high-level tax managers who were recently fired from the company filed a lawsuit claiming that Levi "booked hundreds of millions of dollars in questionable income and tax deductions that artificially inflated the company's profit".

In response to the allegations, the company put out a release denying the allegations late Tuesday night.

"The two former employees who filed the lawsuit were dismissed late last year for reasons completely unrelated to the allegations made in their lawsuit," said Phil Marineau, chief executive officer, in the release. "Unfortunately, they have chosen to respond to their dismissal by making false claims in litigation. After these two individuals raised concerns about Levi Strauss & Co.'s tax accounting, the company's audit committee launched a thorough and independent investigation using outside legal counsel and our outside auditors. Based on the results of the investigation, we confirmed that our tax accounting was accurate and appropriate.

"We take any allegation about our financial reporting very seriously," said Marineau. "We have rigorous practices in place to ensure the integrity of our accounting procedures, including external reviews. We conducted numerous reviews of the issues raised by these former employees, including the independent investigation, which found absolutely nothing to support the allegations. Our financial statements are accurate."

Tenet Healthcare Corp.'s bank debt seemed unfazed by Moody's Investors Service's announcement that the company's ratings were placed under review for possible downgrade. The bank paper was quoted unchanged in the low 90's, although the bonds were said to be off by a little bit, according to a trader.

Ratings placed under review include the Baa3 senior unsecured notes and the Ba1 subordinated notes.

"The review is prompted by heightened uncertainty related to Tenet's financial performance stemming from the company's disclosure of its FY2003 third quarter operating results," Moody's said. "Newly disclosed issues include: (1) identification of higher than anticipated malpractice expenses, (2) delays in payments by managed care payors, and (3) acknowledgement that Tenet expects additional charges in future quarters. Moody's notes that unusual third quarter charges totaling about $530 million and the company's indication that they will take additional charges going forward raise concerns regarding the quality of earnings."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.