Charter bonds gain on asset sale talk, Portola up; DS Waters bank debt firmer

Paul Deckelman and Sara Rosenberg

New York, Nov. 18 - Charter Communications Inc. bonds were seen better Friday on news reports that the debt-laden St. Louis-based cable television systems operator is trying to shop around some non-core assets in the hopes of using the proceeds to cut its heavy debt burden.

Elsewhere, Portola Packaging Inc.'s bonds were up as the Batavia, Ill.-based company reported improved fourth-quarter numbers versus a year ago, including a smaller net loss.

In bank loan dealings, DS Waters Enterprises LP's term loan has firmed by over the past few days on a recent paydown and rating outlook revision, traders in that market said.

Charter's 8¾% notes due 2013 were being quoted a point better at 96.5 bid, 97, while its 11% notes due 2015 were seen having firmed to 86.5 bid, 87.5 offered, a two-point gain, a trader said.

At another desk, the company's 8% notes due 2012 were pegged nearly a point higher at 100.5.

Charter's Nasdaq-traded shares gained 10 cents (8.85%) to close at $1.23 on volume of about 5.4 million shares, although this was only around half the usual turnover.

According to news reports that attributed their information to unidentified sources familiar with the situation, Charter was said to be looking to sell some of its non-core systems in the Midwest and West Virginia that could fetch around $350 million, and had reportedly circulated a "book" featuring detailed financial information about the operations to potential buyers.

Proceeds from such a sale could be used to begin to chip away at the cable operator's mountain of debt, estimated at nearly $20 billion.

Such a sale, should it materialize, could come in the wake of recent successful sales of cable properties by larger rival Cox Communications and by Susquehanna Media.

Also in the cable sphere, a trader in distressed bonds saw bankrupt Greenwood Village, Colo.-based cabler Adelphia Communications Corp. "move a little, up a little bit" on the session, though lower on the week as a whole.

He saw Adelphia's 10¼% notes due 2011 at 63 bid, 64 offered, up a point on the day - but still down five or six points on the week.

Calpine steady

He likewise saw Calpine Corp. "not doing much" on the day, though down five points on the week, as the outcome of its legal action in a case aimed at freeing up over $700 million of asset-sale proceeds remains up in the air.

He saw the San Jose, Calif.-based independent power producer's 8½% notes due 2008 pretty much unchanged at 46 bid, 47 offered.

At another desk, a trader quoted those bonds down a point at 45.75 bid, 46.75 offered, but did see the company's 9 7/8% notes due 2011 up 1¼ points at 72.75 bid, 73.75 offered.

"There was no news on their court case," so Calpine's 8½% notes due 2011 and its 10½% notes due 2006 were each unchanged, another trader said, at 37.5 bid, 38.5 offered, and 68.5 bid, 69.5 offered, respectively.

Calpine sued The Bank of New York and Wilmington Trust Co., the indenture trustees for several series of its bonds, to get access to the proceeds from a $1 billion-plus natural gas asset sale unfrozen, after debtholders complained about how Calpine was spending those proceeds.

Calpine spent $313 million of the money to buy natural gas for its plants, leading the bondholders to direct the trustees to freeze the other $737 million of proceeds.

A Delaware state Chancery Court judge is expected to rule soon on the disposition of the money.

Portola jumps on results

On the earnings front, a trader quoted Portola Packaging's 8¼% notes due 2012 as having risen handsomely to 77 bid, 78 offered, from levels earlier in the week around 71 bid, 72 offered after the company released its fiscal fourth-quarter earnings figures.

Portola reported a net loss of $1.5 million for the fourth quarter of fiscal year 2005 compared to a net loss of $4.5 million for the fourth quarter of fiscal year 2004. For the full fiscal year 2005, it had a net loss of $11.5 million compared to a net loss of $20.8 million for fiscal year 2004.

While the company did post a loss, he said, the numbers "could have been worse."

Tembec bounce continues

The trader also saw Tembec Industries' 8 5/8% notes up a point at 63.5 bid, 64.5 offered, continuing the late rebound seen in Thursday's session. The Canadian forest products producer had reported poor earnings figures, causing its bonds to drop, but its late afternoon conference call Thursday "was OK," causing the bonds to come off their lows late in that session and only end modestly lower, and then to continue to firm Friday. Tembec's 8½% notes due 2011 were seen about a point better at 58.5.

DS Waters loan up further

Bank loan traders said that DS Waters Enterprises' term loan was trading half a point firmer on Friday right around 97.

A couple of days ago, investment fund Kelso finalized its purchase of 100% of DS Waters equity from Groupe Danone and Suntory International and, as part of the transaction, Kelso paid down some of DS Waters' bank debt, the trader explained.

Then on Thursday, Standard & Poor's announced that it was revising the rating outlook on the Atlanta-based bottled water company to positive from negative because of the significant bank debt repayment and alleviation of near-term liquidity concerns.

Mirant bonds stay strong

Back among bond investors, Mirant Corp.'s notes remained firm, in the wake of the news earlier in the week that the Atlanta-based power generating company's major creditor groups and its shareholders had given their approval to its amended plan of reorganization, clearing the way for the bankruptcy court to hold confirmation hearings.

A trader quoted Mirant's 7.90% notes due 2009 at 118.5 bid, up 1½ points, while its 7.40% notes that were to have come due in 2004 likewise were 1½ higher, at 117.5

GM keeps gaining

And General Motors Corp.'s bonds continued their rebound for a second straight session Friday, riding the momentum of Thursday's assurances by the company's chief executive officer that the world's largest carmaker is not headed for bankruptcy, and perhaps helped as well by indications that the bloated automotive giant will soon begin the next step in its painful - but ultimately necessary - effort to bring its operations and expenses more in line with its reduced sales base.

GM was "up significantly," a trader said, quoting the company's benchmark 8 3/8% notes due 2033 as having risen all the way up to 71 bid, 72 offered, which he saw as a five-point rise on the day. The bonds of GM's financing arm, General Motors Acceptance Corp., were likewise up solidly, its 8% notes due 2031 finishing at 100.5 bid, 101.5 offered, up four points.

At another desk, a trader saw the GM 8 3/8s end at 70 bid, 71 offered, off their peak at 71 bid, but still well up from a Thursday close at 68.375. He saw the GMAC 8s press as high as 101 before closing at 100.75 bid, 101 offered, after having finished Thursday at 98.75, "so those babies were really up."

It was the second consecutive session that GM's bonds, and its shares, were on the rise, bouncing back from their recent respective drubbings with the help of chairman and CEO Rick Wagoner's declaration in a letter to company employees GM - despite its recent troubles, which include sagging sales, burgeoning raw materials costs and employee and retiree healthcare expenses and the need to restate some past results, costs - has "absolutely no plan, strategy or intention . . . to file for bankruptcy," contrary to some of the recent speculation in the junk bond and, especially, the credit default swaps markets. Wagoner said that the company has "a robust balance sheet," with $19 billion in cash and $16 billion in trust fund assets earmarked for retiree health care.

GM also announced during the week that the United Auto Workers had agreed to an unusual mid-contract concession on employee and retiree healthcare costs that will shift some of the GM's estimated $5.6 billion annual burden onto the workers and the pensioners, saving the company $1 billion before taxes now and as much as $15 billion in the long run.

And the Detroit News was reporting Friday that GM could soon announce plans a series of plant closures would eliminate at least 25,000 hourly jobs over the next three years. The paper said that such an announcement by the ailing automaker could come as early as next week, maybe even before Thanksgiving, although the timing of the announcement depends on the company's ongoing talks with the UAW, which must sign off on any such actions. Under terms of the current union contract, GM is effectively barred from any such plant closures until the agreement expires in September 2007, although it could "idle" the plants by temporarily halting production at them before then. GM had previously indicated that it would unveil plans for a restructuring of its operations by year end.

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