Charter rises on filing; Michaels slides with downgrade; MGM Mirage falls; LCDX dips

By Sara Rosenberg

New York, March 27 - Charter Communications Inc.'s old and new term loan debt was stronger on Friday following the company's announcement that it filed its pre-arranged plan and Chapter 11 petitions with the bankruptcy court.

Also in the secondary market, Michaels Stores Inc.'s term loan B headed down as the company's ratings were cut by Moody's Investors Service, MGM Mirage's term loan was quoted lower with the company's CityCenter update and the LCDX 10 index was weaker with stocks.

Charter rallies with bankruptcy

Charter Communications' term loan debt was up by a few points on Friday after the company revealed that it went ahead with its previously announced plans to file for bankruptcy as part of a pre-packaged financial structuring, according to a trader.

The old term loan was quoted at 81½ bid, 82½ offered, up from 78¾ bid, 79¾ offered, and the new term loan was quoted at 92¾ bid, 94¾ offered, up from 90½ bid, 92½ offered, the trader said.

Under the restructuring, Charter would receive investments by members of a bondholder committee of more than $3 billion, including up to $2 billion in equity proceeds, $1.2 billion in roll-over debt and $267 million in new debt to support the overall refinancing.

The financial restructuring is expected to reduce the company's debt by about $8 billion.

It is anticipated that cash on hand and cash from operating activities will be adequate to fund the company's projected cash needs and, therefore, there is no intention to seek debtor-in-possession financing.

Charter to reinstate some debt

Charter also announced on Friday that it pre-arranged plan calls for the reinstatement of the current debt of its subsidiaries CCO Holdings LLC and Charter Communications Operating LLC.

The company said that it has paid and intends to continue to pay on a current basis in accordance with existing terms on the secured debt.

The unsecured notes at CCO Holdings LLC will continue to accrue interest that will be paid upon emergence.

"The financial restructuring is good news for Charter and our customers and, if approved, will result in Charter being better positioned to deliver the products and services our customers demand now and in the future," said Neil Smit, president and chief executive officer, in a news release.

"The support of our bondholders and their new investment in Charter also underscores their confidence in our company and business. Charter's operations are strong, and throughout this process, we will continue serving our customers as usual. We look forward to an expeditious restructuring and, once completed, we believe that Charter will be a stronger company," Smit added.

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

Michaels Stores softens

Michaels Stores' term loan B lost some ground during the trading session as the company was hit with a ratings downgrade by Moody's, according to a trader.

The term loan B was quoted at 54½ bid, 56 offered, down from Thursday's levels of 55½ bid, 57½ offered, the trader said.

On Friday, Moody's dropped Michaels Stores' corporate family rating to Caa1 from B3 and senior secured term loan to B3 from B2.

The outlook for the company is stable.

Michaels earnings blamed for downgrade

Moody's said that it lowered Michaels Stores' ratings as a result of the company's weak operating performance, which results in a capital structure that is considered increasingly unsustainable at current performance levels.

According to Moody's, in the fourth fiscal quarter, which is typically the company's most profitable quarter, Michaels Stores' reported a decline in same store sales of 5.6% with EBITDA declining by 22%. As a result, debt to EBITDA increased to in excess of 8.5 times with interest coverage near 1.0 times.

"We anticipate the macro economic environment will remain challenging and we, therefore, expect the company's financial leverage to remain high for an extended period," added Scott Tuhy, Moody's vice president and senior analyst, in the release.

Michaels is an Irving, Texas-based specialty retailer of arts, crafts, framing, floral, wall décor, and seasonal merchandise for the hobbyist and do-it-yourself home decorator.

MGM Mirage heads lower

MGM Mirage's term loan was seen at weaker levels on Friday with news on the CityCenter project, according to a trader.

The term loan was quoted at 43 bid, 45 offered, down from around 45 bid, 47 offered, the trader said.

On Friday, MGM Mirage announced that, with authorization from its senior lenders, it provided $200 million in funding to CityCenter to satisfy the required sponsor equity contributions due around March 24.

The funding, which includes $100 million that should have been funded by Dubai World, allows construction to continue while the company seeks additional funding for the project, and plans are to work with Dubai World, lenders and others to find a long-term financing solution.

MGM Mirage is a Las Vegas-based gaming company.

LCDX down with stocks

In more trading happenings, the LCDX 10 index posted some losses during the session in sympathy with equities, according to a trader.

The index was quoted at 74.15 bid, 74.50 offered, down from 74.50 bid, 74.75 offered, the trader said.

As for stocks, Nasdaq closed down 41.8 points, or 2.63%, Dow Jones Industrial Average closed down 148.38 points, or 1.87%, S&P 500 closed down 16.92 points, or 2.03%, and NYSE closed down 133.89 points, or 2.56%.

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