Charter settles at 79/80 after weeklong drop; Nextel revolver and term D trade

By Sara Rosenberg

New York, Oct. 25 - Charter Communications Inc.'s bank debt saw a steady drop throughout the week as investors showed their dislike for the company's management change and earnings forecasts. The loan did see a one-point improvement on the bid side Friday though as Charter's bonds were quoted higher.

Another name on the move this week was Nextel Communications Corp., which saw its revolver and term D trade Friday. The company's bank debt soared higher as earnings news continued to shock participants in a favorable way.

Charter Communications Inc. ended what can only be described as a down week for the company's bank paper with quotes in the 79 to 80 range, according to a trader. "It's been gyrating around there for the past two days or so," the trader added.

"It's a little better bid today because the bonds were up," a second trader said in reference to Charter's bank debt, adding that Thursday's bid was approximately 78, compared to Friday's bid of 79.

On Thursday, the St. Louis, Mo. cable company held a confidential call with credit facility lenders, providing preliminary third quarter information. The company now estimates that third quarter revenues increased approximately 12.6% and operating cash flow increased approximately 8.7% compared to 2001 pro forma results. At a Goldman Sachs' Communacopia XI Conference earlier this month, Charter announced third quarter estimates for revenue growth to be approximately 13%, below previously projected third-quarter operating cash-flow guidance.

"Revenue and operating cash flow growth resulted primarily from increased digital video and high-speed data customers, partially offset by a decline in analog video customers. The decline in analog video customers is primarily due to competition from satellite providers, customer reaction to increased prices in rebuilt markets, and continued implementation of tightened credit policies announced at the beginning of the year," a news release said.

The bank paper first started to fall off after news of a management change was released on Tuesday, with levels quoted around 82½ bid, 84 offer.

The company announced that executive vice president and chief operating officer David G. Barford was put on paid leave status. Carl Vogel, president and chief executive officer, has assumed Barford's responsibilities on an interim basis. The company initially gave no further explanation but subsequently said the move was in response to a previously announced grand jury investigation.

Earlier this month, Charter traded down by a point during morning activity on Oct. 4 as rumors that the company's chief financial officer was going to resign and liquidity was limited circulated around the marketplace, a trader previously told Prospect News. But the bank debt bounced back up, regaining its losses by late afternoon as market participants were told that the rumors were false.

On Oct. 4, The St. Louis, Mo. cable operator's term loan B bank paper was quoted in the high 85 to 86 region following its recovery from those rumors.

Meanwhile, Nextel's term loan B and C have settled down to around 88 bid, 89 offer from 88½ bid, 89 offer following its point and a half rally on Thursday in response to positive earning news.

But, according to one trader, it was really the revolver and the term loan D that experienced some trading activity on Friday. The revolver traded at 83½ and the term loan D traded at 861/2.

Income for the third quarter was $526 million, or 58 cents per share, including gains of 44c per share due to retirement of debt and preferred stock. Net of these gains, Nextel still blew away analyst expectations with third quarter earnings per share of 14c, compared to estimates of 4c per share.

In follow up news, Gray Television Inc. closed on its new $450 million senior secured credit facility on Friday, according to a syndicate source. Wachovia is the sole lead bank on the Atlanta, Ga. communications company's deal.

The loan, secured by basically all assets, consists of a $375 million eight-year term loan B with an interest rate of Libor plus 325 basis points and a $75 million seven-year revolver with an interest rate of Libor plus 300 basis points.

Proceeds were used to help fund the acquisition of 15 stations from Stations Holding Co., parent of Benedek Broadcasting. Effective with the merger Stations Holding has changed its name to Gray MidAmerica Television, Inc.

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