Charter up on extended debt exchange offer; Turning Stone slates 8-year deal

By Paul Deckelman and Paul A. Harris

New York, Aug. 30 - Charter Communications Inc.'s bonds firmed on Wednesday, helped upward, traders said, by news of the St. Louis-based cable operator's extended private debt exchange offer as well as by supportive comments about the company from Charter's enigmatic principal owner, tech billionaire Paul G. Allen.

While Charter's bonds were headed upward, no movement was seen in the notes of sector peer Cablevision Systems Corp., even though the Bethpage, N.Y.-based cabler said that it would delay filing its latest financial results as it restates several years of financials due to discrepancies in dating stock option grants. Moody's Investors Service warned that it may downgrade the company's ratings.

Elsewhere, "it seemed like there was a lot of nothing going on," said a trader, as activity continued at a languid pace ahead of the upcoming Labor Day holiday break, which will see the debt markets close early on Friday (The Bond Market Association has recommended a 2 p.m. ET shutdown) and close altogether on Monday. After that, things are expected to pick back up.

A trader noted that the recently active automotive sector was perhaps a little higher to mostly unchanged.

At another desk, a trader agreed that the auto parts names looked better, particularly in morning trading, helped by the recent moderating trend in oil prices, as well as the rumors and speculation about big internal restructuring moves that have that have swirled around the embattled Ford Motor Co. for most of the past week.

A sell-side source marked the broad high-yield market slightly higher but very quiet on Wednesday.

Meanwhile a primary market that turned out no news whatsoever during the past five market sessions turned out a bit of news on Wednesday.

Turning Stone Casino Resort, a Syracuse, N.Y., full service gaming and entertainment casino and hotel operation run by the Oneida Indian Nation, will hold an investor conference on Sept. 5 to present its $160 million offering of eight-year senior notes, which are expected to price late in the post-Labor Day week.

Banc of America Securities is the bookrunner for the debt refinancing, distribution funding and general corporate purposes deal.

During the Wednesday session both Standard & Poor's and Moody's assigned ratings to the notes.

S&P, which assigned its B+ rating to the notes, lowered its ratings on Turning Stone Resort Casino Enterprise, including its issuer credit rating, to B+ from BB-. The outlook is developing.

S&P added that the downgrade reflects its concerns associated with ongoing litigation pertaining to several issues that, if not resolved favorably, could meaningfully hurt the nation's credit profile, noting that ratings reflect Turning Stone's narrow business focus as an operator of a single property in upstate New York and ongoing litigation related to its gaming compact and its use of multi-game machines.

Meanwhile Moody's assigned its Ba3 rating to the notes.

Looking to September

Market sources are returning to their posts in anticipation of an active new issue market commencing post-Labor Day and running more or less right through the end of the year.

On Wednesday one sell-sider professed the expectation that a lot of new issue business will be announced beginning in the Sept. 11 week, and added that throughout October and into November the new issue market figures to be "really packed."

This source's institution forecasts new issue volume of $37 billion between this coming Tuesday, when the market begins its post-Labor Day run, and the end of the year.

That is the highest estimate for post-Labor Day through year-end new issue volume that Prospect News has heard thus far.

The lowest estimate heard for that period thus far is $15 billion.

Chairman cherishes Charter

Back in the secondary realm, a trader said. "Everything had a good tone - but there was no one around, and not much liquidity."

In this thin market, Charter bonds were climbing, pushed up, the trader said by "Allen reinforcing his commitment to the company," followed by the company's announcement Tuesday night of plans to amend and extend its previously announced offer to exchange new debt for its existing notes with maturities from 2009 to 2012.

"It looks like they're re-opening the exchange," the trader said, noting that the company's short-dated unsecured bonds were "up significantly. For instance, one of the issues covered in the exchange offer, Charter's 11 1/8% notes due 2011, jumped to 78 bid from prior levels around 74.

Another trader likewise saw Charter's unsecured short debt up 3 to 4 points, quoting its 8 5/8% notes due 2009 as having risen to 91 bid, 92 offered.

"So the unsecured bonds are up," the first trader said, "and Paul Allen says he still loves the company."

Allen, the chairman of the company, spoke at Charter's annual shareholders' meeting on Tuesday in Seattle - not far from where the Microsoft Corp. co-founder lives - touting Charter's prospects and praising the job that company CEO Neil Smit has done in his first year as Charter's hands-on boss.

"With Neil at the helm, Charter has made significant progress across its entire business," the communications tycoon enthused.

Referring to changes Smit has made in the company's top executive ranks, its rollout of telephone service, which allows Charter to better compete with traditional phone companies trying to muscle in on its cable business, and Smit's efforts to whittle down Charter's $19.5 billion debt, Allen said that "as a direct result of the financial and strategic actions we've taken, Charter today is a more solid company with growing potential."

Among the debt-related moves have been a refinancing of some $6 billion of debt and the sale of non-strategic systems that have raised $1 billion of cash to help pay down debt. Charter's debt burden, however, is still the heaviest of any company its size in the industry.

Allen is both the company's controlling shareholder and its biggest bondowner as well, and his continued financial support of Charter is seen as key to the company's fortunes. Charter's bonds and shares have on occasion risen temporarily on market talk that the billionaire might be increasing his stake, although he has made no recent moves to do so.

Other Charter investors have still been heartened, though, by Allen's cheerleading for the company, even in tough financial times.

"I am pleased with the results Charter is delivering and believe we are well positioned to pursue growing success," Allen added at the shareholders' meeting.

Cablevision calm despite default danger

Out of that same industry came the news late Tuesday that Cablevision had advised its credit facility lenders that it will be unable to deliver its financial reports for the periods ended June 30 of this year and last year, due to a need to restate those results because of problems in the way it recorded stock option grants - an accounting error which had recently occurred at a number of large companies.

Cablevision said that while normally the failure to submit financials in a timely manner would be a breach of the credit agreement, which could widen into an event of default if not cured within 30 days of notice from its lenders, those lenders, except for those on its term loan B, had granted the company a default waiver, good through Sept. 22.

Should it not have the results in by then, and should a notice then be given on the next business day, Sept. 25, it would have 30 days to cure the condition or be in danger of possibly having its loan accelerated. Cablevision said that it expects to have the restatements completed and the financials filed by that potential cure deadline, although it cautioned that it could give no guarantees.

While Cablevision has not reached agreement on a waiver with the term loan B lenders, it has a longer time frame - 60 days rather than 30 days - in which to cure any potential default.

Moody's, which currently rates Cablevision's debt at B1 on a corporate family basis - with the company's senior unsecured notes at B3, and its CSC Holdings Inc. seniors at B2 - warned that it was putting its ratings on $11.5 billion of Cablevision and CSC Holdings debt on review for a possible downgrade. Standard & Poor's also has the company's debt on watch.

Despite that daunting news, traders said, Cablevision's bonds, or CSC Holdings', were little seen on Wednesday and not much changed. A trader quoted the parent's 8 1/8% notes due 2009 unchanged at 103 bid, 104 offered, while its 8% notes due 2012 were likewise level at 100.5. CSC Holdings' 7 7/8% notes due 2018 were steady at 102.

Auto names up additionally

In the autosphere, a trader saw the partsmakers "stronger today," even though Ford's bonds were little changed. On Wednesday, Ford's 7.45% notes due 2031 hung in at 78.5 bid.

Ford, and the bonds of its Ford Motor Credit Co. financial arm, had been firming over the last few sessions on market speculation, fueled by media reports, that Ford might consider selling some of the valuable credit unit to raise as much as $6 billion and position it for a credit ratings boost and resulting lower borrowing costs.

While Ford itself was flat, relative to Tuesday's levels, the credit arm's 7% notes due 2013 - after briefly pushing as high as the 95 area - came off those peak levels to finish just under 93, up from its 92 finish Tuesday, though unchanged from its opening levels Wednesday.

The trader saw former Ford unit Visteon Corp.'s 7% notes due 2014 "up a couple of points" at 89.5 bid, 90.5 offered, while ArvinMeritor's 8¾% notes due 2012 were up a point at 97.5 bid, 98.5 offered, and Goodyear Tire &Rubber Co.'s 9% notes due 2015 were ½ point better at par bid, 101 offered.

Another trader saw Van Buren Township, Mich.-based parts maker Visteon's 8¼% notes due 2010 a point better at 97.5 bid, 98.5 offered, while Akron, Ohio-based tire giant Goodyear's 7.857% notes due 2011 were ½ point better at 97.

However, Metaldyne Corp.'s 11% notes due 2012 - which had benefited from a late rebound on Tuesday to closing levels above 80 bid - fell back on Wednesday to 79.25. The Plymouth, Mich.-based metal parts maker's bonds had been boosted over the previous several sessions by merger and acquisition speculation sparked by a report last week that a buyer might soon emerge.

A trader saw the company's 10% notes due 2013 unchanged at 94 bid, 95 offered.

Jean Coutu juniors back off

Jean Coutu Group Inc.'s 8½% subordinated bonds due 2014 - which had firmed over the previous two sessions back up to around 94 bid from the 92ish context at which they had ended trading last week, were seen down about a point Wednesday to 83 bid, 84 offered.

Those bonds "have been volatile," a trader said, with heavy activity levels, and big moves last week between 92 and par, pushed alternately by investor belief the bonds might be taken out using part of the cash portion of the proceeds from the Canadian pharmacy owner's sale of nearly 1,900 Eckerd and Brooks drug stores in the United States to Rite Aid Corp., and company assertions that they will not be bought back but rather will be assumed by Rite Aid as part of the deal.

Some subordinated noteholders continue to insist that the company is obligated to buy the bonds back, and media reports say they could decide to organize and challenge management on this, although the outcome is by no means certain.

Jean Coutu's 7 5/8% senior notes due 2012 - whose indenture more clearly specifies that those bonds are to be taken out using such asset-sale proceeds - continue to hover at their anticipated 105 takeout level.

Rite Aid's 9¼% notes due 2013 were meantime up ½ point at 97.5. But the Camp Hill, Pa.-based Number-Three U.S. drugstore chain operator's 6 7/8% notes due 2013 were a point softer at 83.

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