Cable names rebound as stocks continue to improve

By Sara Rosenberg

New York, Aug. 22 - Cable names strengthened Thursday in secondary bank loan trading following a two-day strong performance of cable companies' stocks. Even Charter Communications Inc. was able to halt its three-day run downwards and managed to bounce back up a few points, according to a fund manager.

"Cable names as a whole rebounded and stocks were notably stronger as well," the fund manager said.

Charter Communications was bid around 83 on Thursday, up from Wednesday's bid of 81 and offer of 83. Insight Communications Co. and Mediacom Communications Corp. were bid around 931/2, up from a bid around 91, according to the fund manager.

At close on Thursday, Charter's stock was at $3.13, up $0.25 or 8.68%, Insight's stock was at $9.85, up $0.70 or 7.65% and Mediacom's stock was at $5.78, down slightly by $0.06 or 1.03%.

The upward momentum that was noticeable in cable companies' bank debt is probably in reaction to the improved equity and bond performance of these companies in the last few sessions, the fund manager said.

On Wednesday, cable stocks stole the spotlight on news of an AOL Time Warner/AT&T deal, in which AOL will buy AT&T's stake in Time Warner Entertainment.

In other news, Nextel Communications Inc. was quoted up by a couple of points on Thursday with the term loan B and C trading at 85 7/8, the term loan A around 84 and the term loan D around 83 and change, according to a financial professional.

The Reston, Va. wireless company's stock also moved up Thursday on news of possible consolidation in the competitive sector as reports emerged that Deutsche Telekom AG may sell or merge VoiceStream. Nextel's stock closed at $7.80, up $0.60 or 8.33% on the day.

Meanwhile, Alpharma Inc., a Fort Lee, N.J. pharmaceutical company, has been quoted with a very large bid/ask spread, something that is "very unusual" in this market, the fund manager said. The company's bank debt is being bid around 91½ and offered around 961/2.

"I'm guessing someone wants to sell and no one sees a reason to buy," the fund manager said. "Or a desk or customer thinks there's a desire to sell and is maybe trying to tempt it out at lower levels."

Overall, Alpharma has been disappointing investors, according to the fund manager, with stock that has basically been heading downwards and company issues such as a need to improve one of its plants. "There has just been several quarters of disappointing news," the fund manager explained.

Another company that has been "consistently disappointing people even though its stock has been up the past couple of days" is Calpine Corp., the fund manager said. The San Jose, Calif. power company's term loan B bank debt has been drifting lower since it broke in the secondary not too long ago, and is currently being bid around 84 and offered around 86.

"Everybody when they got that deal thought this is an okay company and it's considered well over-secured," the fund manager said. "There was also a bland assumption that rollovers of revolver maturities would happen fairly easily. I think people still think it will happen but there might be a little more nervousness now than there was. Also, there's some sector woe. Nothing is good in utilities the past couple of weeks."

Calpine's term loan B had some trouble getting off the ground in the primary when it was initially launched. After the interest rate and the security were increased, institutional investors started showing more enthusiasm towards the offering. In fact, interest improved so much that the syndicate was able to upsize the loan to $1 billion from $600 million, taking the additional $400 million from the company's pro rata tranche.

The credit facility was launched to "smaller retail investors" in early-May at a discount of 100 basis points. Initial price talks had the term B at an interest rate of Libor plus 275 basis points. However, the interest rate was later revised upwards to Libor plus 375 basis points, a syndicate source previously told Prospect News. The loan was originally secured by interests in the company's natural gas properties, the Saltend power plant in the United Kingdom and equity investments in nine U.S. power plants. The company supplemented the security by adding mortgages on gas properties as collateral.

© 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.