Charter and Calpine both halt recent gains, dipping slightly ahead of holiday weekend

By Carlise Newman

Chicago, April 17 - Calpine Corp. dipped slightly as its recent rally weakened a bit in extremely quiet bank loan trading stifled by the Passover, Good Friday and Easter holidays that shorten hours in the markets. In addition, Charter Communications Inc.'s term loan B came off of its highs touched this week after the company received word that it would receive $300 million in financing from its founder.

Calpine's bank debt fell about half a point to 94, according to a trader, for reasons none other than profit-taking ahead of the holidays. Calpine had been relishing a mild rally this week after taking a beating the week before.

Assumptions that the San Jose, Calif.-based independent power operator would follow the lead of industry peers such as AES Corp., El Paso Corp., Reliant Resources Inc. and Dynegy Inc. and would soon be able to announce a refinancing deal had been lifting Calpine for most of the week. The energy sector in its entirety has seen gains as upgrades and as a result better investor confidence boost the once-ailing companies.

A trader said Charter Communications Inc.'s term loan B fell from previous levels to 911/2, about a quarter-point lower, he said. Charter, as well, had been pushing higher after accepting an offer from Paul Allen, the co-founder of Microsoft Corp. and owner of Vulcan Inc., to lend the company $300 million to help meet the terms of its credit facilities.

Earlier in the week it was revealed that Allen's Vulcan is in talks to transfer cable systems in Texas or New England owned by Charter Communications Inc. to Comcast Corp. as part of an effort by Vulcan to restore Charter to financial health.

The talks stem from a right that Comcast has to sell to Allen an ownership stake in Charter that it inherited when it acquired AT&T Broadband last year. Allen, the controlling shareholder of Charter, is required to pay $725 million for that stake.

In primary news, Advanced Accessory Systems LLC obtained $145 million to finance its leveraged buyout by Castle Harlan Inc.

The loan consists of a $40 million revolver, a $40 million term loan A and a $60 million term loan B. The loan is self-syndicated by Castle Harlan.

Castle Harlan announced it completed its acquisition of Advanced Accessory on April 15 in a transaction valued at approximately $260 million.

Two-thirds of Advanced Accessory's sales are to original equipment manufacturers in North America and Europe and one-third to the aftermarket. Customers include all of the major automotive companies. Advanced Accessory is based in Sterling Heights, Michigan, and has 18 manufacturing facilities throughout North America and Europe.

The company had been owned by JPMorgan Partners, the private-equity arm of J.P. Morgan Chase & Co., which purchased AAS along with management in 1995. (See story on page one of this issue.)

But that loan was about it in terms of activity.

"I got two calls at once today and I thought I was hot!" said one trader. "But that was the high point. It was dead silent today."

Accordingly, one market source was discussing the loan obtained by Teco Energy Inc. As Prospect News previously reported, Teco obtained a new $350-million unsecured 364-day multiple drawdown senior term credit facility on April 11. Merrill Lynch was the lead bank on the loan.

The new facility will be available if the company needs to refinance the bank term loan maturing in November.

The source said that due to the recurrence of downgrades on energy companies, Teco obtained the loan to ward off the ratings agencies.

"It's basically an insurance policy against downgrades," said the source. "They have maturities coming due. They want everyone to know they have the facility if they need it."

Interest on the loan is linked to the yield of Teco's 7.2% senior notes due May 1, 2011 plus 25 basis points. The spread over Libor on the loan is set at the trading spread over Treasuries of the 7.2% notes minus the swap spread to Libor for the Treasury with a maturity closest to the 7.2% notes - with 25 basis points then added. The facility has an unused commitment fee of 50 basis points.

Obtaining the new facility is part of the company's plan to strengthen its financial position. Towards this end, the company opted to reduce its dividend by 46% to an annual rate of 76 cents.

The market source said Dominion Resources also obtained a revolving credit facility in the same manner.

"It's a backstop. It's never used and is not designed to be used," he said.

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