Charter better as stock climbs on upgrade; GM rise halted

By Paul Deckelman and Sara Rosenberg

New York, July 5 - Charter Communications Inc.'s bonds were seen better in Wednesday's generally quiet back-to-work session in the junk market, following the St. Louis-based cable company's shares up after its got an equity upgrade from a major investment banking house.

Also on the upside was Northwest Airlines Corp., possibly due to investor response to the better June load factor numbers posted by the bankrupt Eagan, Minn.-based Number-Four U.S. airline carrier.

On the downside, General Motors Corp. bonds, and those of its General Motors Acceptance Corp. financing subsidiary, were seen easier as a two-session advance fueled by takeover buzz growing out of investor Kirk Kerkorian's efforts to bring GM into an alliance with carmakers Renault SA and Nissan Motor Co. appeared to have run out of gas.

Also helping to stop GM's upside momentum were cautionary comments by France's interior minister to the effect that such a three-way alliance between GM, the French carmaker and Nissan, was by no means a done deal.

Bank debt participants meantime said that market continued to show little or no activity in the debt of beleaguered companies.

A trader saw Charter's 8 5/8% subordinated notes due 2009 up two points on the session, at 78 bid, 80 offered. He attributed the gain to the news that Citigroup upgraded the stock to "buy" from "sell." That news pushed Charter's Nasdaq-traded shares up seven cents (6.31%) to $1.18.Volume of 15.4 million shares was more than double the norm.

Analyst Jason Bazinet, in making his recommendation for an upgrade, said that Charter - which has struggled for some years under heavy debt burdens and an inability to compete with larger, better-funded competitors like Comcast Corp. and Time Warner - said Charter is poised for a turnaround

In his note to clients, Bazinet said he expects the company to reverse three flat years of EBITDA as it rolls out Voice-over-Internet Protocol services, or VoIP.

Bazinet also praised the Charter management team, headed by chief executive officer Neil Smit, for having "a clear, well-defined strategy for turning Charter around."

Separately, Charter on Monday announced that it had completed the sale of several of its assets to Cebridge Acquisition Co. and New Wave Communications, for a total of about $896 million.

Northwest higher

Investors saw Northwest Air's bonds gaining altitude, with its 8 7/8% notes at 49 bid, 51 offered, up two points, and its 8.70% and 9 7/8% notes each up a point at 50.

The rise coincided with the release of passenger data for the month of June. While the carrier flew 7.01 billion revenue passenger miles in June, down 8.7% from 7.68 billion a year ago, Northwest's load factor - measuring how full its planes are - pushed up to 88.9% in June, up from 86.6% in the year-earlier month.

Each revenue passenger mile represents one paying passenger flown one mile.

GM slips

Back on terra firma, a trader said, "there was very little going on," with GM softer, on what he termed "the rumblings coming out of the French government."

He saw the Detroit giant's benchmark 8 3/8% notes due 2033 off a point at 80 bid, 81. Those bonds had previously firmed several points to the 81 level from the middle 70s after billionaire tycoon Kerkorian, who owns 9.9% of GM, suggested in a regulatory filing that GM seek to enter an alliance with Renault and Nissan, and said those companies might be willing to buy up to 20% of the troubled U.S. carmaker.

The trader cited the impact of remarks made by French interior minister Francois Loos, who cautioned Renault - which is 15% owned by the French government - to exercise "extreme caution" before bringing GM into its alliance with Nissan.

Loos told a French TV channel that such a three-way hookup "is not a done deal, it's an idea."

The fact that the Paris government, as a major Renault shareholder, has the power to block the combination if it chooses, helped to put a damper on the Kerkorian rally in GM bonds that had pretty much dominated what little real activity the junk market secondary had shown over the past two, admittedly, pre-holiday sessions.

That wet blanket on the campfire came amid a background of other developments that seemed to indicate that a linkup between GM and the other carmakers might actually come to pass.

News reports said that GM's board of directors would discuss the Kerkorian idea on a Friday conference call, while other reports - attributing their information to unidentified sources - indicated the GM's chairman and chief executive officer, G. Richard "Rick" Wagoner, would meet his counterpart at Renault and Nissan, Carlos Ghosn, to discuss the matter face to face. There has been no official confirmation of the latter report. Other news reports speculated that a sizable investment by Renault and Nissan might give Kerkorian the leverage to force Wagoner out and put Ghosn at the top of the company, in hopes that he might be able to repeat the miracle turnaround he produced several years ago at Nissan.

Kerkorian, whose Tracinda Corp. investment vehicle has a representative on GM's board, former Chrysler executive Gerald York, said in his filing Friday with the Securities and Exchange Commission that the alliance between Renault and Nissan, cemented by their interlocking ownership - Renault owns 44% of Nissan, which in turn owns 15% of Renault, with Ghosn presiding over both - has produced millions of dollars of synergies between the two carmakers. He said that GM, which lost billions of dollars last year and which is wallowing deeply in red ink so far this year, needs to be able to get similar synergies and savings.

Another trader saw the GM benchmark bonds at around 80.25, while GMAC's 7.45% notes due 2031were unchanged at 95.25 bid, 95.75 offered.

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