Charter refinancing seen in the works with rumored $6.5 billion credit facility

By Sara Rosenberg and Ronda Fears

New York, March 26 - Charter Communications Inc. is said to be in the process of putting together a new credit facility for refinancing purposes, but this time, the rumors appear to carry more weight as the paper has been holding steady around the 99 area in the secondary over the course of the past week and a potential structure and lead banks on the financing have been circulating as well.

Currently, the refinancing is being talked as a $6.5 billion credit facility, consisting of a $3 billion revolver and a $3.5 billion term loan B, according to a market source. And, JPMorgan and Bank of America are said to be leading the deal, the source added.

"I think they're trying to get the big tickets in first," the market source explained. While a second source added that "nothing has gone out to investors yet."

The rumored lead banks, however, declined to confirm any of the information at this time. And, Charter declined to comment on the financing as well, saying, "We don't comment on rumors or speculation."

In the secondary though, the St. Louis cable company's bank debt was quoted at 98¾ bid, 99½ offered by a trader who said that the paper has "been slowly moving up over the past couple of days."

A second trader placed the bank debt at around 98½ bid, 99½ offered "solidly all week."

"Usually when these things just come and go you get more volatility than that," the second trader said regarding the refinancing rumors.

There are some questions surrounding a bank refinancing, with one issue being the company's convertibles that come due in 2005. "There's an unwritten rule that you don't usually lend bank debt to take out bond debt," a market professional said. "I think this probably has to be done in consideration of a likely bond deal."

"That's not necessarily true," a trader said regarding the comment about not lending bank debt to take out bond debt, "Have you seen Allied Waste recently? But I would guess that there will be a bond deal also. I wouldn't be surprised if that's why they're not commenting, because they're trying to set up a bond deal."

On Friday, there was no unusual trading in Charter's 5.75% convertibles due 2005, but they did move around a little bit trading off by about half a point and then rebounding to 95 bid, 96 offered to end the day pretty much unchanged, according to a convertibles trader.

"Anything that comes out will have execution risk because of overexposure on this name," a different market professional added.

Currently the company has about $8.96 billion of total bank debt, according to a 10-K filed with the Securities and Exchange Commission on March 15, so a $6.5 billion credit facility would in a sense reduce banks' exposure to Charter.

Gundle/SLT early April

Gundle/SLT Environmental Inc.'s debt financing is likely to be an early-April event as the company is still going through the proxy process and other approvals that are needed to take a public company private, according to a market source.

Furthermore, new details emerged on the debt financing including information that the package will consist of a $65 million credit facility and a $150 million high-yield bond offering.

The $65 million credit facility will contain a $40 million revolver and a $25 million term loan with syndication "likely to be a club style execution," the source said.

The structure of the bonds is still to be determined since it really will be a function of the ratings and ratings are not expected to come out until early April, the source added.

Previously, it was reported that Gundle/SLT would get a $215 million credit facility, however, according to the source, that number included the $65 million loan and $150 million of bridge financing to back the issuance of the high-yield notes.

It was also initially thought that the deals would launch at the end of February or beginning of March, but timing was always fluid since the company needs to complete regulatory procedures that can take months to wrap up.

UBS is the sole lead on both the bank and the bond financing.

Proceeds from the credit facility and the bond offering will be used to back the acquisition of Gundle/SLT Environmental Inc. by Code Hennessy & Simmons LLC. Under the acquisition agreement, all of Gundle/SLT's common stock will be converted into cash at the rate of $18.50 per share.

Gundle/SLT is a Houston manufacturer and marketer of geosynthetic lining solutions, products and services.

Home Interiors oversubscribed

Home Interiors & Gifts Inc.'s $320 million term loan B has reached oversubscription over the last day or so at its latest pricing level of Libor plus 425 basis points, which emerged earlier this week, according to a market source. The tranche also carries a 1% upfront fee.

Allocations on the deal are anticipated to take place on Monday, with closing targeted for mid-next week, the source added.

Over the course of syndication the institutional tranche was flexed up twice, first to Libor plus 375 basis points from Libor plus 325 basis points and then to Libor plus 425 basis points from Libor plus 375 basis points.

The $370 million credit facility (B2/B) also contains a $50 million revolver with an interest rate of Libor plus 275 basis points. Investors get 1% for revolver commitments as well.

JPMorgan and Bear Stearns are the lead banks on the deal, with JPMorgan listed on the left.

Proceeds will be used to refinance about $169.8 million of existing senior debt, to repurchase all approximately $139 million or a portion of the company's outstanding convertible preferred stock, for general working capital purposes and to pay transaction fees and expenses.

On a pro forma basis after giving effect to the refinancing and the anticipated use of the proceeds from the refinancing, as of Dec. 31, 2003, the company would have had about $474.6 million in total debt, compared to approximately $323.2 million in total debt as of Dec. 31, 2003 on an actual basis.

Home Interiors & Gifts is a Dallas integrated manufacturer and distributor of home decorative accessories.

El Paso holds firm

El Paso Corp.'s revolver held firm at 98¼ bid, 99¼ offered on Friday following news of a formal investigation by the Securities and Exchange Commission regarding reserve revisions as most investors were not surprised by the news, a trader explained.

"We will cooperate fully with the SEC or any other government agency conducting an investigation," said Doug Foshee, president and chief executive officer of El Paso, in a company news release. "In February, we proactively initiated an independent review of our reserve revisions, and we expect to complete that review no later than the end of next month. We will work to put this matter behind us as soon as possible so that we can focus on achieving the goals of our long-range plan."

In reaction to the news of the formal investigation, Standard & Poor's put out a bulletin stating that the investigation would not have an immediate affect on the Houston energy and gas company's ratings.

"While clearly negative for credit quality, the possibility of an SEC investigation was considered when the company's ratings were lowered in February in response to the reserve revision," S&P said. "At that time, it was noted that the revision also raised corporate governance concerns, and the outcome of the company's internal investigation into the reserve reduction and any other repercussions from the write-down could result in further rating actions."

Educate to bring new deal

Market talk is that Educate Inc. will be hitting the primary with a new bank deal that will be led by JPMorgan, according to a source. No further details were available prior to press time.

The Baltimore-based company closed on a $130 million credit facility (B1/B+) consisting of a $20 million five-year revolver and a $110 million term loan in July of 2003 that was used to help fund the acquisition of Sylvan Learning Systems Inc.'s K-12 businesses.

Tucson Electric closes

Tucson Electric Power Co. closed on its new $401 million credit facility consisting of a $60 million revolver and a $341 million synthetic letter-of-credit facility with a letter-of-credit fee of 2.35%.

J.P. Morgan Chase & Co., Credit Suisse First Boston and Lehman Brothers Inc. acted as joint co-lead arrangers, and Union Bank of California and The Bank of New York served as co-documentation agents on the deal.

The revolver is for general corporate purposes and the letter-of-credit facility is to support $329 million aggregate principal amount of tax-exempt variable rate bonds, according to a company news release.

Security is second mortgage bonds issued under Tucson Electric Power's general second mortgage indenture.

The new facility replaces the Tucson, Ariz., electric company's previous $401 million credit agreement that would have expired in 2006.

Saguaro closes

Saguaro Utility Group LP closed on its $410 million credit facility, which will be funded upon closing of the acquisition of UniSource Energy Services.

The facility consists of a $360 million term loan with an interest rate of Libor plus 450 basis points, which was offered to investors at 99, and a $50 million revolver with an interest rate of Libor plus 350 basis points.

The revolver is for general corporate purposes, while the term loan is to help fund the UniSource acquisition.

J.P. Morgan Chase & Co., Credit Suisse First Boston and Lehman Brothers Inc. acted as joint co-lead arrangers, and Union Bank of California and The Bank of New York served as co-documentation agents on the deal.

UniSource's shareholders are scheduled to meet on Monday to consider a proposal to approve the proposed acquisition. The transaction requires shareholder approval as well as the receipt of required regulatory approvals and the satisfaction of other conditions.

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