Charter B loan trades sideways at 90½ after 300 basis points gain last week

By Sara Rosenberg

New York, April 14 - Charter Communications Inc.'s term loan B traded at 90½ on Monday in an otherwise very quiet secondary bank loan market. Over a time span of about one week, the paper has managed to move higher by about 300 basis points, according to a Banc of America Securities research report.

The 90½ level is basically in line with where the St. Louis cable company's paper has been quoted lately, a trader said.

"Mondays generally aren't that active," the trader said in regards to the day's lack of trading activity. "Also, it's a short week. The bond market is closed Friday and there's an early close Thursday so a lot of people won't be in those days."

In addition to the upcoming holiday and the Monday mentality, the secondary market has been quiet for other reasons as well, including a lack of new issuance.

"The secondary market has been a little slow over the past few weeks," the trader remarked. "There's a lack of new issuance. People aren't selling because they're looking around to see where the next big deal will be coming from. There's a lot of cash. There are definitely people who will buy. The hard part is generating paper right now."

Recently, there has been a noticeable trend in which participants are seeing more cash in investors' hands, leading to a firming up of the secondary market. The increase in available cash is partly attributable to an increase in the number of deals hitting the high-yield bond market with proceeds earmarked for the repayment or reduction of bank debt.

This additional cash is not only affecting the secondary market, but is creating tighter spreads in the primary market as well.

"Against the backdrop of a relatively weak forward calendar and growing liquidity due to a robust high-yield bond market, select high-yield loan issuers are successfully reverse price-flexing again (i.e. Amkor Technologies). Others are officially pricing below 'talk' (i.e. Allied Waste)," the Bank of America report said.

High yield bond mutual funds experienced inflows of $1.2 billion, marking the seventh consecutive week of inflows and the third straight week of $1 billion plus inflows. Year-to-date inflows now total $12.7 billion, already exceeding the $11.4 billion for full year 2002.

"At some point, these flows are likely to fuel meaningful term loan repayments, boosting institutional loan demand," the report added.

Another contributing factor to the increase in available money is the emergence of new investors in the bank loan market, a market professional said. "There are new people investing in the market that hadn't traditionally done so - hedge funds, distressed investors. Returns are becoming more interesting particularly when you look at some of the energy credits."

For example, CMS Energy Corp.'s 11/2-year term loan was recently upsized to $250 million from $175 million due to overwhelming demand for the tranche that is priced with an interest rate of Libor plus 700 basis points.

CMS' $925 million credit facility (up from an initial size of $850 million) also contains a $516 million (up from $441 million) one-year revolver for CMS Enterprises with an interest rate of Libor plus 550 basis points and a $159 million (down from $234 million) one-year revolver for CMS Energy with an interest rate of Libor plus 550 basis points.

The Dearborn, Mich. energy company's loan is secured by common stock.

Citibank, NA, Merrill Lynch Bank USA and Deutsche Bank Trust Company Americas are the lead banks on the deal.

Meanwhile, Walter Industries Inc.'s $250 million seven-year term loan B (Ba2/BB), which was said to be having some trouble syndicating, was flexed up to Libor plus 425 basis points from Libor plus 400 basis points, according to market sources. Furthermore, the B loan is now selling at 98¾ and call protection was added at 101, sources said.

In addition to the B loan, the facility contains a $250 million five-year revolver.

Bank of America is the lead bank and SunTrust is the co-bookrunner on the Tampa, Fla. diversified company's deal, which will be used to pay off the old facility and for general corporate purposes.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.