Charter moves higher on news of $300 million loan proposal from Paul Allen

By Sara Rosenberg

New York, April 1 - Charter Communications Inc. continued its upward climb on Tuesday following the release of preliminary earnings news that included mention of a possible loan from Paul Allen.

Charter's term loan B quoted around 88 bid, 89 offer, according to a trader, who added that over the past five days the loan has moved up by about three points and since Monday the loan has moved up by about a point.

Charter disclosed in its earnings announcement Tuesday that in February it received a proposal from Paul Allen, chairman of the board, offering to provide a backup credit facility of up to $300 million to the company and certain of its subsidiaries. The loan would be used to provide assistance in meeting certain covenants under the existing credit facilities. The board of directors has formed a special committee and financial and legal advisors have been retained to evaluate this proposal, the release said.

The trader explained that news of this proposed loan helped push Charter's bank debt north during market hours on Tuesday.

Preliminary financial results included annual 2002 revenue of approximately $4.6 billion, an increase of approximately $597 million over restated annual 2001 pro forma revenue of approximately $4 billion. Annual 2002 adjusted EBITDA totaled approximately $1.8 billion, an increase of approximately $253 million over restated annual 2001 pro forma adjusted EBITDA of approximately $1.5 billion. Net loss applicable to common stock and loss per share for the year ended Dec. 31, 2002 were $2.5 billion and $8.55, respectively.

Fourth quarter 2002 revenue totaled approximately $1.2 billion, an increase of approximately 13% over restated quarterly revenue of approximately $1.1 billion for the fourth quarter of 2001; while fourth quarter adjusted EBITDA totaled approximately $457 million, an increase of approximately 14% over restated year ago quarterly adjusted EBITDA of approximately $402 million.

The St. Louis cable company also announced that it will file for an extension for filing its Form 10-K report and those of its subsidiaries to provide additional time to finalize its financial statements, related filings, disclosures and audits. As of March 31, the company has consolidated cash of approximately $450 million, which is expected to be sufficient to fund current operating requirements and debt service obligations. Until the required financial statements are delivered to its bank lenders, the company will be unable to make additional borrowings under three of its bank facilities.

Nextel Communications Inc. was also reported higher on Tuesday with the term loan B and term loan C quoted around 98, according to a trader. On Monday, the two tranches traded at 97 5/8.

The Reston, Va. wireless company's loan was said to be trading higher due to improved overall market conditions, according to the trader.

Reliant Resources Inc.'s bank debt may see a huge jump in the near future, according to one trader, now that the company has closed on a new $6.2 billion credit facility (see story elsewhere in this issue for further details).

Prior to the announcement of the new financing, the bank debt was quoted in the mid-70s, around 74/75, according to the trader. However, now "the expectation would be that pricing will jump up a good solid 10 to 20 points. The structure is like Allegheny's and that's what happened to that bank debt," the trader said.

Reliant Resources is a Houston provider of electricity and energy services.

In the primary, a handful of deals have been tweaked recently, including Goodyear Tire & Rubber Co., Kmart Corp., Key Automotive and Town Sports International, according to market sources.

Goodyear increased pricing on the two tranches of its $1.3 billion asset-based credit facility (Ba2/BB+) by 50 basis points, a move which was already anticipated by market participants last week. The facility now consists of an $800 million term loan B with an interest rate of Libor plus 400 basis points and a $500 million revolver with an interest rate of Libor plus 400 basis points, sources said. The facility matures in 2006. JPMorgan and Citigroup are the lead banks on the loan.

The Akron, Ohio tire company announced on Tuesday that it completed its comprehensive refinancing plan and restructuring of its bank credit and accounts receivable facilities, including closing on the new $1.3 billion facility.

"These new agreements will provide Goodyear with additional financial flexibility and liquidity," said Robert J. Keegan, president and chief executive officer, in a news release. "They give us both the time and the opportunity to turn around our North American Tire business."

Specifically, the company replaced $2.94 billion in financing with $3.3 billion in credit facilities that include a $750 million secured U.S. revolver due in 2005, a $645 million secured U.S. term facility due in 2005, $650 million of secured European facilities due in 2005 and the $1.3 billion facility.

The restructured credit agreements replace facilities that generally had shorter maturities but, with the exception of $763 million in U.S. and Canadian accounts receivable facilities, were unsecured, according to the release. Certain international accounts receivable securitizations, which the company intends to replace or restructure, remain in place, as do a limited amount of additional foreign committed and uncommitted lines of credit.

Kmart added a term loan B to its $2 billion exit financing facility, sources said. The loan currently consists of a $1.8 billion revolver and a $200 million term loan B with an interest rate of Libor plus 350 basis points.

The loan already launched to managing agents on March 25 and is scheduled to launch to retail on Thursday.

GE Commercial Finance, Fleet Retail Finance Inc. and Bank of America are the lead banks on the Troy, Mich. discount retailer's deal that will be used to replace the company's debtor-in-possession financing facility and help fund working capital needs.

Key Automotive was reworked, adding a term loan C, reducing the sizes of the revolver and the term loan B and increasing pricing on the tranches.

Presently, the loan consists of a $90 million revolver with an interest rate of Libor plus 400 basis points, a $210 million term loan B with an interest rate of Libor plus 450 basis points and a $50 million term loan C with an interest rate of Libor plus 1000 basis points. Originally, the deal was launched as a $100 million revolver with an interest rate of Libor plus 350 basis points and a $250 million term loan B with an interest rate of Libor plus 400 basis points.

Citi and Merrill Lynch are the lead banks on this deal that will be used to help fund acquisitions.

Lastly, Town Sports removed the term loan B from its proposed credit facility, leaving only the $50 million revolver in the primary bank loan market (B+/B1). The five-year revolver is priced with an interest rate of Libor plus 400 basis points.

Deutsche Bank and BNP Paribas are the lead banks on the facility for the New York-based owner and operator of health clubs.

According to a syndicate source, the term loan B was shifted to the company's bond offering, which hasn't priced as of yet.

Meanwhile, Weight Watchers Inc. closed on its $85 million six-year term loan B (Ba1) that was priced at Libor plus 250 basis points. Credit Suisse First Boston and Bank of Nova Scotia were the lead banks on the deal.

The term loan B was used to help fund the acquisition of nine franchises from The WW Group, Inc. for a purchase price of $181.5 million.

Weight Watchers is a Woodbury, N.Y. global branded consumer company and a provider of weight-loss services.

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