Charter firms size, breaks for trading; Anchor Drilling sets talk; Foamex rises; LCDX slides

By Sara Rosenberg

New York, March 12 - Charter Communications Operating LLC's incremental term loan freed up for trading early on in the session Wednesday after finalizing the size of the loan that was increased during its one-day marketing period because of strong market reception to the deal.

Also in trading, Foamex International Inc.'s bank debt headed higher on news of a stock for second-lien debt exchange and a first-lien paydown, and LCDX 9 and the cash market in general felt slightly weaker as equities came off in the afternoon.

In other news, Anchor Drilling Fluids USA Inc. came out with price talk on its credit facility now that the New York bank meeting has taken place.

Charter Communications's incremental term loan (B1/B+) hit the secondary market on Wednesday morning after the size firmed up at $500 million, according to a trader.

The new term loan was quoted at 96 7/8 bid, 97 7/8 offered on the break and then it inched down to 96 5/8 bid, 97 5/8 offered, where it closed out the day, the trader said.

Meanwhile, the company's existing term loan B rebounded a bit from Tuesday's losses, with levels going out at 84½ bid, 85½ offered, up from 84 bid, 85 offered, the trader continued.

Charter's drive-by incremental term loan was launched to investors on Tuesday morning with a size of $275 million. Then on Tuesday afternoon, investors were told that the deal would be sized in the area of $400 million to $500 million as a result of good demand.

Pricing on the term loan is Libor plus 500 basis points, with a 3.5% Libor floor and an original issue discount of 96.

During the short syndication process, the original issue discount on the loan finalized at the wide end of original guidance of 96 to 97.

Amortization is a quarterly principal installments totaling 1% annually beginning on June 30.

JPMorgan and Citigroup are the lead banks on the term loan, with JPMorgan the left lead.

Net proceeds of $471 million from the term loan due March 6, 2014 will be used to repay revolver borrowings and for general corporate purposes.

Charter also sold $520 million of 10 7/8% second-lien notes due 2014 on Tuesday. The purchase price of the notes is 96.1% of the principal amount.

Proceeds from the notes will also be used to pay down revolver borrowings.

Closing on the debt transactions is expected to occur in about one week.

After giving effect to term loan and the notes, the company expects that cash on hand, cash flows from operating activities, and the amounts available under the credit facility will be adequate to fund projected cash needs, including scheduled maturities, through 2009.

However, in an 8-K filing on Tuesday, the company said that it does not expect to have sufficient funds to finance projected cash needs in 2010, primarily as a result of the $2.2 billion of senior notes maturing in September 2010, and thereafter.

Charter warned that an inability to access additional sources of liquidity to fund cash needs in 2010 or thereafter, or to refinance or otherwise fund the repayment of the senior notes, could adversely affect growth, financial condition, results of operations, and the ability to make debt payments.

The company went on to say that a situation in which additional funds are not obtained for 2010 and thereafter could cause a bankruptcy filing to take place.

Charter is a St. Louis-based broadband communications company and cable operator.

Foamex up with deleveraging plans

Foamex's bank debt was stronger during market hours after the company announced plans to offer its second-lien loan lenders stock for debt, and pay down first-lien borrowings, according to a trader.

The second-lien term loan was quoted at 78 bid, 82 offered, up from 74 bid, 76 offered, the trader said.

Under the proposed offering, Foamex's second-lien loan lenders will be given the option to purchase common stock at $1.50 per share, using their second-lien loans at par value.

The company is also planning a rights offering to all of its stockholders to purchase its common stock at $1.50 per share as well.

The company anticipates receiving collectively a minimum of $80 million in new equity, which would be through a combination of cash and an exchange of second-lien loans.

Proceeds from the rights offering would be used to prepay the loans under the company's first-lien credit facility.

Any second-lien loans that are used to purchase common stock would be canceled.

The proposed transactions are subject to the amendment of the second-lien term loan to allow for the assignment of stock, and the consent of the first-lien lenders.

Consents from loan lenders are due at 5 p.m. ET on March 13.

The consent fee for the first-lien lenders is $862,500, to be shared pro rata by consenting lenders, and the consent fee for the second-lien lenders is 25 basis points.

Bank of America is leading the consent and amendment process.

Some positives of doing the offerings are that Foamex's credit profile would improve, there would be significant deleveraging, there would a reduction of interest expense, trading levels on the first-and second-lien term loans are expected to improve, and management would be provided with the ability to execute on their operating strategy and continue to reduce leverage, the company said in an 8-K filing.

Foamex is a Linwood, Pa.-based manufacturer of flexible polyurethane and advanced polymer foam products.

LCDX, cash soften

LCDX 9 and the cash market both felt somewhat negative, especially in the afternoon when stocks took a turn for the worse, according to traders.

The index was quoted at 92.05 bid, 92.15 offered, down from Tuesday's levels of 92.30 bid, 92.40 offered, traders said.

As for cash, things were weaker by about an eighth to a quarter of a point, traders continued.

"Today's been extremely quiet. Volume was really pathetic," one trader remarked. "Felt fine this morning with the Dow up. When the Dow came down, we felt weaker."

Dow Jones Industrial Average closed down 46.57 points, or 0.38%, Nasdaq closed down 11.89 points, or 0.53%, S&P 500 closed down 11.88 points, or 0.90%, and NYSE closed down 61.45 points, or 0.70%.

Anchor Drilling price talk

Moving to the primary, Anchor Drilling held a bank meeting in New York on Wednesday to present its $125 million five-year credit facility to lenders, and in connection with the launch, price talk was announced, according to a market source.

Both the $15 million revolver and the $110 million term loan B are being talked at Libor plus 500 bps, with a 3.5% Libor floor and an original issue discount of 99, the source said.

In addition to the New York launch, there was a bank meeting held in Houston this past Tuesday for the transaction.

Jefferies is the lead bank on the deal that will be used to help fund the buyout of the company by Castle Harlan Inc.

Other acquisition financing will come from $60 million of mezzanine debt that is being provided by American Capital Strategies.

Leverage through the first-lien is 2.7 times and total leverage is 4.2 times. EBITDA is $41 million.

Anchor Drilling is a Tulsa, Okla., drilling fluids company.

Press Ganey closes

Press Ganey Associates Inc. closed on its $220 million credit facility, consisting of a $20 million revolver priced at Libor plus 400 bps, with a 50 bps unused fee, and a $200 million first-lien term loan priced at Libor plus 400 bps that was sold to investors at an original issue discount of 98.

Lehman Brothers and GE Capital acted as the lead banks on the deal that was mostly marketed towards banks, with Lehman the left lead.

Proceeds were used to help fund Vestar Capital Partners's acquisition of a majority interest in the company from American Securities Capital Partners, LLC.

Other financing came from $100 million of mezzanine debt priced at 12½% that was led by Lehman and ICG, and Vestar and management contributed over 50% in equity.

First-lien leverage is around 3.8 times, and leverage through the mezzanine is around 5.75 times.

Press Ganey is a South Bend, Ind.-based provider of quality improvement services to hospitals and health care facilities.

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