Adelphia paper experiences some trading activity as investor concerns continue to grow

By Sara Rosenberg

New York, May 20 - Despite a somewhat positive spin on the prospects of Adelphia Communications Corp.'s bank loans by Standard & Poor's Monday, the company's paper was down a little to flat during trading hours. A couple of trades on the company's loan took place in an otherwise quiet secondary market as some people are trying to get rid of the paper, a trader said. The Adelphia Century loan traded in the high 80s, he added.

On Monday, Standard & Poor's once again downgraded Adelphia, this time lowering the corporate credit rating to D from CCC-. The downgrade reflects a missed interest payment on the company's $400 million 9.375% senior unsecured notes. Ratings on the secured bank loans at Adelphia's subsidiaries were unchanged at CCC and remain on CreditWatch negative.

"Maintenance of the secured bank loan ratings reflects prospects that, given the value of the cable television properties in the respective bank credit agreements, these creditors have reasonable prospects to ultimately receive full repayment in a liquidation scenario," S&P said.

In a time span of one week, this repeatedly headline-making company has seen the resignation of its chief executive officer, the resignation of its chief financial officer and has participated in a hearing on possibly being delisted from the Nasdaq due to the delay in filing an annual report.

In primary news, Mobile Storage Group Inc.'s recently launched $200 million secured credit facility (Ba3/BB) is being reevaluated, according to a syndicate source. Credit Suisse First Boston and Lehman Brothers are co-leads on the deal. The company is evaluating its strategy at this point, the source explained, due to the poor performance of a different company in the same sector. This other company missed earnings and traded off. Since performance is often linked to sector, Mobile Storage is assessing the prospects for its bank loan, but no conclusions have been drawn at this point, the source added.

Chances are, the company will try to figure out if there's a bid out in the market, a market professional said. It stands to reason that if a direct competitor showed weakness, it will be hard for Mobile Storage to raise debt and equity, he added.

Closing on the credit facility is anticipated to take place on the effective date of the IPO, which most likely will occur in June, a company spokesman previously told Prospect News. There has, however, been some unconfirmed market talk of the IPO possibly being tabled for the time being.

The company's loan currently consists of a $60 million five-year revolver and a $140 million five-year term B tranche. Security for the facility is a first priority lien on all tangible and intangible assets. Proceeds will be combined with proceeds from an initial public offering to repay existing debt.

Mobile Storage is a La Crascenta, Calif. renter and seller of containers, offices and trailers for storage purposes.

In other primary news, Six Flags Inc. is scheduled to hold a bank meeting in early June regarding its new $1.050 billion credit facility, according to a syndicate source. Lehman Brothers is the lead bank on the deal. The loan is expected to consist of a $600 million seven-year term B, a $300 million six-year working capital revolver and a $150 million six-year multi-currency revolver. The Oklahoma City, Okla. theme park operator will use the new credit facility to refinance existing debt. Basically all assets of the company are being used to secure the loan.

Reader's Digest Association Inc., a Pleasantville, N.Y. global publisher and direct marketer, closed on its new $950 million credit facility, which consists of a five-year term and a six-year term, according to a company press release. JPMorgan and Goldman Sachs arranged the financing and more than 80 other banks and lenders took part in the facility, the release said. Proceeds are being used to fund the purchase of Reiman Publications LLC, to find the repurchase of $100 million of class B voting common stock and to refinance some existing debt.

In follow-up news, commitments on Boyd Gaming Corp. and The Borgata are due by May 30 to 31, according to a syndicate source. Borgata is "generously oversubscribed" and Boyd was "more than two times oversubscribed," the syndicate source said.

On May 9, The Borgata, a $1 billion entertainment resort under construction in Atlantic City, brought a new $187.5 million term loan B (B+/B2) to market. CIBC is the sole lead arranger for the deal. The loan is expected to close during the end of June.

The loan was priced with an interest rate of Libor plus 400 basis points and has a maturity date of Dec. 13, 2007. The resort is being developed through a joint venture with Boyd Gaming Corp. and MGM Mirage.

Also on May 9, Boyd Gaming Corp., a Las Vegas, Nev. gaming company, came to market with a $500 million credit facility (Ba1/BB). CIBC is sole lead arranger for the deal. The credit facility is expected to close during mid-June.

The loan consists of a $400 million five-year revolver with an interest rate of Libor plus 250 basis points and a $100 million five-year term B with an interest rate of Libor plus 250 basis points. There is a commitment fee of 50 basis points on the revolver. Proceeds will be used to refinance $200 million of senior notes, which are due in October 2003.

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