Charter continues to feel strong with quotes in the low 90s as investors' comfort grows

By Sara Rosenberg

New York, May 12 - Charter Communications Inc. term loan B was sideways to a little bit stronger on Monday as many continue to feel good about the company and its recent achievements. The bank paper was quoted at 90½ to 91, according to traders.

"I'm hearing it was better bid," a trader said. "It might be up by about a quarter. The bonds are up. Most people are feeling a little better about the credit. They're feeling comfortable after the numbers came out and exceeded expectations at the top line. People are comfortable that Paul Allen is backing up the company with a new facility. It's been up for a while."

Last week, the St. Louis cable company released first quarter results that included revenue of $1.178 billion, an increase of 9.7% over last year's first quarter revenue of $1.074 billion; adjusted EBITDA of $458 million, up 7.5% over adjusted EBITDA of $426 million for the year ago quarter; net loss applicable to common stock of $182 million and loss per share of $0.62 compared to the restated results for first quarter 2002 of net loss applicable to common stock of $317 million and loss per share of $1.08; net cash flows provided by operating activities totaling $162 million, an increase of $60 million, or 59%, as compared to the first quarter of 2002; and, cash on hand of $446 million.

Last month, Charter entered into a commitment letter with Vulcan Inc., an affiliate of Paul Allen, under which Vulcan would lend Charter Communications VII, LLC up to $300 million. This credit facility includes a subfacility of up to $100 million for the issuance of letters of credit, according to a filing with the Securities and Exchange Commission.

Interest on the loans would be initially 13% per annum, reducing to 12% per annum when CCH II, LLC becomes the borrower under the facility. If letters of credit are issued, the borrower would pay a letter of credit fee of 8% per annum.

The loans and letters of credit could only be used to repay loans or replace letters of credit under the operating subsidiaries' credit facilities in order to remain in compliance with leverage ratios or to create cushions in excess of the minimum amount necessary to comply with the ratios.

The proposal from Paul Allen for the loan was received in February and was approved by a special committee and the board of directors on April 11. The facility is subject to the negotiation and execution of definitive documentation by June 30.

Nextel Communications Inc. bank debt was quoted at 97¾ bid, 98¼ offered on Monday, about an eighth softer than it was on Friday, according to a trader.

Meanwhile, market talk is that Xerox Corp. launched its $1 billion credit facility last week to somewhat of an unreceptive market.

"I hear they're struggling to get it done," a market participant said, adding that he heard that some fees were being added to the deal on Monday.

The facility is said to consist of a $700 million revolver and a $300 million term loan.

JPMorgan, Deutsche Bank, Citigroup, UBS Warburg, Merrill Lynch and Goldman Sachs are all said to be involved in the deal.

One of the banks named as participant refused to confirm or deny the market talk, the existence of the deal and/or their involvement.

In follow-up news, Knowledge Learning Corp. completed its acquisition of Aramark Corp.'s Educational Resources division for $250 million in cash, which includes prepayment of a $40 million note for $25 million.

In connection with the acquisition, Knowledge Learning obtained a new $260 million credit facility (Ba3/B+), consisting of a $235 million seven-year term loan B and a $25 million five-year revolver. BNP Paribas was the lead bank on the deal.

Knowledge Learning is a San Rafael, Calif. provider of childcare services.

SBA Communications Corp. closed on a new $195 million credit facility that matures on Dec. 31, 2007 from GE Structured Finance (GESF) and affiliates of Oak Hill Advisors, Inc. The facility was not launched for general syndication, a source close to the deal previously told Prospect News.

The facility consists of a $95 million term loan and a $100 million revolver, both bearing interest at a rate of Libor plus 400 basis points. Additional interest of 3.5% per annum would also accrue but not be payable until maturity. The revolver would convert to a term loan no later than June 30, 2004.

Amortization of borrowed amounts would begin in 2004, at an annual rate of 1% in 2004 and 15% in each of 2005, 2006 and 2007.

Security is a first lien on substantially all of the company's assets.

Proceeds, combined with cash on hand and proceeds from tower sales to AAT Communications Corp., were used to refinance SBA Telecommunications, Inc.'s existing $300 million senior credit facility, which currently had $255 million outstanding.

The new loan provides the company with more permitted uses of capital, a longer maturity and more favorable covenants than the amended existing credit facility.

SBA is a Boca Raton, Fla. owner and operator of wireless communications.

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