Midday Commentary: Time Warner Cable tightens on merger announcement; Comcast eases

By Cristal Cody

Tupelo, Miss., Feb. 13 - Time Warner Cable Inc.'s bonds (Baa2/BBB/BBB) unwound much if not all of the takeover-related widening seen over the past couple of months after the company announced it would merge with Comcast Corp., according to market sources early Thursday.

The agreement comes after Charter Communications Inc. (Ba3/BB-/) continued to push forward in a hostile takeover attempt of Time Warner Cable by nominating 13 directors to the board on Tuesday.

Comcast (A3/A-/A-) will acquire Time Warner Cable in a $45.2 billion all-stock deal valued at $158.82 per share.

The merger is expected to close by the end of the year and must be approved by regulators and shareholders of both companies.

Time Warner Cable, a New York City-based broadband communications company, had rejected Stamford, Conn.-based Charter Communications' offer in January of $132.50 per share as too low.

In the secondary bond market, Time Warner Cable's 4% notes due 2021 tightened more than 100 basis points to about 140 bps bid from Wednesday's levels, a source said.

The notes jumped to 102.939 early Thursday from 94.197 on Wednesday, according to a market source.

The issue traded at 270 bps bid, 260 bps offered in early December.

Time Warner Cable sold $1 billion of the notes at a spread of 210 bps over Treasuries in 2011.

Comcast's 2.85% notes due 2023 eased 6 bps to 86 bps in secondary trading early Thursday, according to a market source. Comcast sold $750 million of the notes on Jan. 8, 2013 at a spread of 100 bps over Treasuries.

Comcast, based in Philadelphia, operates Comcast Cable and NBCUniversal.

Investment-grade bonds ease

The high-grade bond market overall opened the day slightly wider on a round of corporate earnings reports after the close on Wednesday, a source said.

The Markit CDX North American Investment Grade series 21 index closed on Wednesday 1 bp tighter at a spread of 65 bps.

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