Charter Communications bonds fall on hiring news; Sirius XM notes extend gains on EchoStar rumors

By Stephanie N. Rotondo

Portland, Ore., Feb. 6 - Distressed bond traders reported Friday that the market tone had improved from the beginning of the week, though some deemed the day as "a typical Friday."

Charter Communications Inc.'s bonds ended the day weaker following news that the cable provider had hired a turnaround expert to help with its restructuring process. Traders saw the debt drop as much as 6 points, as the news seemed to validate reports that a bankruptcy filing is imminent.

Meanwhile, Sirius XM Radio Inc.'s debt continued to advance. The bonds had gained during the previous session on rumors that EchoStar Corp. was buying up chunks of the company's debt. Some are speculating that, if the rumors are true, it could be a way for EchoStar to gain some sort of control.

Charter falls on hiring news

Charter Communications' bonds fell anywhere from 2 to 6 points on the day following news that the company had hired a turnaround expert.

A trader quoted the 10¼% notes due 2010 at 57 bid, 58 offered, calling that a 3- to 4-point decline. The 8¾% notes due 2013 dipped 2 to 3 points to 72 bid, 73 offered and the 11% notes due 2015 closed at 15 bid, 16 offered versus 17 bid, 18 offered on Thursday.

Another trader saw the 10¼% notes at 54 bid, 55 offered, a loss of 5 to 6 points. He added that there was "not a lot of volume" in the name.

The St. Louis-based cable provider hired Greg Doody, a lawyer who had previously helped Calpine Corp. cut its debt in half. Charter has already said it was working with bondholders on a restructuring effort, but so far, no deal has been made.

But the news of the hiring likely boosted chatter that the company was very close to filing for Chapter 11 protections. Doody's addition to Charter's staff is in addition to the hiring of Kirkland & Ellis and Lazard Ltd., both of which are bankruptcy and restructuring experts.

Charter currently has more than $20 billion in debt and recently missed a coupon payment.

Sirius notes continue gains

Sirius XM's debt continued to gain ground after rumors surfaced on Thursday that EchoStar Corp. was grabbing up pieces of the debt structure.

A trader called the 9 5/8% notes due 2013 better at 34.5 bid, 36.5 offered. Another pegged the issue at 37 bid, 39 offered, up from 34 bid, 38 offered on Thursday and 27 bid, 28 offered "a couple days ago."

Yet another trader said the notes continued to be better, gaining another couple points to close around 36.

The satellite radio producer's bonds jumped during Thursday trading on reports that EchoStar's top dog, Charles Ergen, had bought up a piece of the $300 million debt maturing later this month.

"The concept is that EchoStar started buying bonds, or so the rumor goes," a trader said. "That may be in an attempt to take some sort of control."

But other market players believe that the goal is not to eventually force the company into bankruptcy, but to gain assets.

"If Ergen could accumulate enough of a position to prevent Sirius XM from refinancing its 2009 maturities, he would be a formidable and unwelcome addition to the bondholders' table," CreditSights analyst Jake Newman said in a research note.

Sirius, which has seen its stock fall since its merger with XM, has $925 million in debt maturing in 2009. As such, the company has been swapping debt for equity to reduce its overall debt load, but in particular, its Feb. 17 maturity.

Broad market mostly better

United States Steel Co.'s 7% notes due 2018 traded up slightly to 75, a trader said. Another trader placed the paper at 75 bid, 76 offered.

Freeport-McMoRan Copper & Gold Inc.'s 8 3/8% notes due 2014 were "definitely higher," a trader said, around 85, with $50 million trading. The floating-rate notes due 2015 were also better at 71.5, with about $45 million changing hands.

In the gaming world, Wynn Las Vegas LLC's 6 5/8% notes due 2014 were "kind of sideways, maybe a point better overall on the week" at 74, according to a trader. About $74 million of the paper traded.

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