Charter earnings call expected to churn up lots of activity in Monday's market

By Sara Rosenberg

New York, Aug. 6 - All eyes are on Charter Communications Corp. as investors are pessimistically awaiting next week's release of financial results, as was apparent in Friday's down tick in bank debt levels, with the focus only enhanced by the chief financial officer's recent resignation.

"They're coming out with numbers Monday. A lot of people are staying close because the CFO just resigned," a market source said, adding that there will probably be a lot of activity in the bank debt after earnings come out.

On Friday, Charter's term loan B ended the day quoted at 98 bid, 98½ offered compared to an opening level of 98 bid, 99 offered, but it traded at 98 1/8 plus, about a ¼ lower than it traded on Thursday, according to another trader.

"People are a little bit bearish [on earnings], which is evident in how it's traded," the trader said.

Charter's term loan A, however, walked away from Friday's session unscathed at 97 1/8 bid, 98½ offered, according to the market source.

Around mid-week, Charter revealed that executive vice president and chief financial officer Michael P. Huseby is leaving the company effective Aug. 20 to become executive vice president and chief financial officer of Cablevision Systems Corp.

Although the St. Louis cable company's bank debt did eventually end up lower on the CFO news this past Wednesday, it had spent the morning at stronger levels on rumors of a potential equity infusion from Paul Allen.

"Paul Allen rumors are always out there just because he has so much money," the market source said. "I doubt the company will say anything about that on the call because they don't address rumors."

Wyndham trades up

Wyndham International Inc.'s "RCIV" bank debt traded around 99 on Friday, up about 50 basis points, as investor sentiment toward the hotel sector continues to improve with improved financial results, according to a trader.

"Hotels are doing better. Rooms are filling up. Charging more. [Wyndham] has slowly been ticking up," the trader said.

Just look at the company's latest second quarter earnings numbers - pro forma EBITDA increased 14.3% to $67.3 million, actual EBITDA met previous guidance at $79.5 million, and owned and leased RevPAR increased 10.5% to $92.19.

Furthermore, in a move that is expected to ease an upcoming refinancing effort of the credit facilities due April 2006, the Dallas-based lodging company now plans on selling 33 more assets with proceeds earmarked for debt and leverage reduction, according to a company news release.

Hollywood merger shaky

Hollywood Entertainment Corp. announced Friday that the merger with an affiliate of Leonard Green & Partners LP may fall through because of financing complications or if completed, may be on different terms than those contained in the existing merger agreement.

"Due to industry and market conditions, Leonard Green & Partners believes that the financing condition to the consummation of the merger will not be satisfied," a company news release explained.

"Hollywood and the special committee of its board of directors are considering Hollywood's alternatives to determine the course of action that would be in the best interests of Hollywood's shareholders," the news release added.

Hollywood Entertainment was expected to approach the loan market with a $475 million credit facility consisting of a $400 million six-year term loan and a $75 million five-year revolver containing a 50 basis points commitment fee, with initial interest rates ranging from Libor plus 300 to 350 basis points, depending on ratings.

UBS was slated to be the lead bank on the deal.

Timing on the launch has been incredibly fluid with some hoping that a bank meeting would occur this summer and some anticipating a fall launch because of a long regulatory approval process.

The company was also expected to issue $600 million of high-yield notes to support the merger and to back up the bond offering, the company had received a commitment for $600 million in bridge financing from UBS, consisting of a $400 million senior unsecured bridge loan and a $200 million senior subordinated unsecured bridge loan, both with a term of one year and both bearing interest at the greater of 10.2% or Libor plus 925 basis points.

Leonard Green & Partners LP, through Green Equity Investors IV LP, had committed equity financing for the transaction.

Under the original merger agreement, Hollywood's shareholders were expected to receive $14.00 per share in cash.

Hollywood Entertainment is a Wilsonville, Ore., video chain.

Stanadyne closes

Stanadyne Corp. closed on its $100 million credit facility consisting of a $65 million six-year second-lien, covenant light term loan (B2/B+) with an interest rate of Libor plus 350 basis points and a $35 million five-year asset-based revolver (B1/BB) with an interest rate of Libor plus 225 basis points.

Initially the term loan was priced at Libor plus 375 basis points but was reverse flexed during syndication on strong demand.

Goldman Sachs was the sole lead bank on the deal.

Proceeds from the term loan, combined with proceeds from $160 million of new senior subordinated notes and $105 million of equity, were used to help fund the leveraged buyout of the company by an affiliate of Kohlberg & Co. LLC.

Stanadyne is a Windsor, Conn., provider of technology and services for engine components and fuel systems.

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