Firm secondary tone; Charter moves up a point; Corrections Corp. steady on boosted guidance

By Sara Rosenberg

New York, April 2 - The secondary bank loan market was described as firm overall on Wednesday with names generally either moving up or holding steady, according to a trader. Examples included Charter Communications Inc., Nextel Communications Inc. and Corrections Corp. of America - although in addition to the market's tone Charter may still be heading up on Tuesday's Paul Allen loan announcement and Corrections Corp. of America boosted its guidance on Wednesday.

Charter's term loan B was quoted with an 89 bid, 90 offer, up a point from Tuesday's levels, according to a trader. The loan has continually been moving up in the secondary market over the past couple of days, including Tuesday when the company disclosed in its earnings announcement that in February it received a proposal from Paul Allen, chairman of the board, offering to provide a backup credit facility of up to $300 million to the St. Louis cable company and certain of its subsidiaries.

The loan would be used to provide assistance in meeting certain covenants under the existing credit facilities. The board of directors has formed a special committee and financial and legal advisors have been retained to evaluate this proposal, the release said.

Nextel's term loan B and C were said to be "firm" with quotes in the low 98s on Wednesday, according to a trader. During the previous day's activity, the loans were quoted at 98, and on Monday the loans traded at 97 5/8.

The Reston, Va. wireless company has not released any specific news lately to cause the strengthening in the bank debt.

Corrections Corp. of America's bank debt was reported to be steady but firm with quotes over par, a trader told Prospect News. On Wednesday morning, the company announced that it expects to exceed the first quarter EBITDA guidance of $49 to $51 million and full year 2003 EBITDA guidance of $206 to $210 million that was provided on Feb. 12. Now the company is expecting first quarter EBITDA to be in the range of $54 to $55 million and full year EBITDA in the range of $215 to $220 million, excluding costs associated with any financing transactions.

"Portfolio occupancy during the first quarter has been stronger than expected with respect to both our Federal and State customers. Overall, we expect average compensated occupancy for the quarter to fall in a range of 91.5% to 92.0%," said John Ferguson, president and chief executive officer, in a news release. "In addition to higher occupancy levels, we are also beginning to see some of the effects of our cost containment efforts, particularly in the area of food and medical expenses. We expect the combination of higher occupancy levels and better cost control to improve our operating margins to approximately 25% for the first quarter of 2003."

The company also announced plans to reduce debt under its term loan using cash on hand and the anticipated proceeds of a tax refund (see story elsewhere in this issue for further details). In addition, the company intends to make a public offering of its common stock and $200 million of its new senior notes due 2011.

Corrections Corp. of America is a Nashville, Tenn. owner and operator of privatized correctional and detention facilities.

In the primary, Ethyl Corp.'s proposed $165 million credit facility, which launched on Wednesday, is expected to possibly get off to a slow start but end up syndicating successfully, according to a market professional.

"We listened. We're taking a look at it," the professional said. "These guys get hammered when petroleum prices are high because that tends to be the primary ingredient for anything they make."

But, he continued: "I think it's a reasonably known commodity. The company has been around forever so they do have a following. It's a small deal. It's a refinancing. The structure looks reasonable. There's some junior capital below them. Senior secured debt to EBITDA is 1.4 times, which isn't too bad. And they're adding in some high-yield notes."

However, the professional concluded by saying that the deal will probably move along slowly "until the notes are issued and that will establish relative value" and then the deal will get done.

"The sector is under a bit of pressure but leverage is pretty conservative. It probably will take some time to put the book together but at the end of the day it will get done," another source said, adding that the bank meeting "seemed to go okay and people are excited about the deal."

The loan consists of a $50 million five-year revolver with an interest rate of Libor plus 350 basis points and a 50 basis points commitment fee, and a $115 million six-year term loan with an interest rate of Libor plus 400 basis points.

Upfront fees are 50 basis points on the term loan and 125 basis points on the revolver.

Credit Suisse First Boston and UBS Warburg are the lead banks on the deal.

Ethyl is a Richmond, Va. developer, manufacturer, blender and marketer of fuel and lubricant additives technology and products.

Also launched on Wednesday was Amkor Technology Inc.'s $200 million credit facility (Ba3/B+), according to market sources. Citi and JPMorgan are the lead banks on the deal.

The loan consists of a $30 million revolver due 2005 with an interest rate of Libor plus 425 basis points and a $170 million term loan B due 2006 with an interest rate of Libor plus 425 basis points, sources said.

Proceeds will be used to refinance existing debt.

Amkor is a West Chester, Pa. provider of semiconductor assembly and test services.

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