Charter bonds gain on smaller loss; CMA CGM prices downsized 10-year deal

By Paul Deckelman and Paul A. Harris

New York, May 7 - Charter Communications Holdings LLC bonds firmed smartly in Wednesday's dealings, after the problem-plagued St. Louis-based cable-TV operator reported a narrower loss from a year ago, and a gain in EBITDA.

In the primary market, French container ship operator CMA CGM SA pulled into port with a downsized €100 million offering of new 10 -year bonds, while Key Energy Services, Semco Energy Inc. and Norse Skog climbed onto the forward calendar.

Charter "seemed OK on its numbers, better than [Tuesday]," a trader said. He quoted the company's benchmark 8 5/8% notes due 2009, which had finished on Tuesday at 64.5 bid/65.5 offered, as having gone as high as 68 bid/69 offered during Wednesday's dealings, before ending the session at 67 bid/68 offered.

Charter shares were up nine cents (4.79%) to $1.97 on Nasdaq volume of 18 million, nearly three times the norm.

Charter reported a net loss of $182 million (62 cents a share), having narrowed from the $317 million loss ($1.08 a share) seen a year earlier. Adjusted EBITDA rose 7.5% to $458 million in the latest quarter, from $426 million).

While Charter lost about 50,000 analog video customers during the quarter, and 31,700 digital customers, it touted the sharp growth in its high-speed data services business, which added 134,200 customers during the quarter to swell the total number of subscribers to 1.272 million - approximately double the year-earlier level.

Elsewhere, however, a trader said that "today was possibly the beginning of plateauing in the market, or even some profit taking" among names which heretofore had been heading upward.

One such name was Calpine Corp., which on Tuesday had announced that it expects to post a 12-cent per share first-quarter loss - analysts had been expecting about a four-cent-per-share profit - and warned that it would miss filing its quarterly report by the May 15 deadline, citing its recent change in auditors. On Wednesday, the San Jose, Calif.-based independent power producer's bonds "were getting kicked around," the trader said, quoting its 8½% notes due 2011 as having fallen from yesterday's 70 bid/72 offered level to a late-day Wednesday offered price of 68, looking for a bid.

"Calpine got mowed," another trader declared, pegging the 81/2s as low as 67 on the session.

Calpine shares meantime lost 35 cents (7.14%) in New York Stock Exchange dealings to end at $4.55 on volume of 17.1 million shares, about triple the usual turnover.

Also continuing to head south from the formerly powerful energy generating grid was AES Corp., "going down," a market observer said, with the Arlington, Va.-based global power producer's 9½% notes a point lower at 97.5 bid; its 9 3/8% notes due 2010 were quoted at 95 bid, down at least three points from recent levels, while its 8 1/8% notes due 2005 also hung around that same level.

Its 8¾% notes due 2008 and 10¼% notes due 2006 were each down a point, in the 95 and 97 ranges, respectively.

The company's newly issued 8¾% notes due 2013 and 9% notes due 2015, which had priced at par last Thursday and which had then moved up to above 102 bid, were seen having eased to levels just below par.

Among other merchant energy names, Dynegy Inc.'s 8 1/8% notes due 2005 were quoted nearly three points easier, at 94.5 bid, while Mirant Corp.'s 8.30% notes due 2011 were a point lower, at around 67 bid. Mirant's other issues, such as its 7.4% notes due 2004 and 7.90% notes due 2009 were seen unchanged, at 83 bid/85 offered and 63 bid/65 offered, respectively.

The Atlanta-based utility company - saddled with an $8.6 billion debt load, including $1.125 billion coming due in July and hoping to somehow avert a bankruptcy filing down the road - said that it is in talks with banks and bondholders to refinance $5.3 billion of its debt.

Bonds of the energy traders had until recently all been heading northward, as AES, Dynegy and other sector names successfully swung refinancing deals, leading to investor optimism that such players as Calpine and Mirant would be able to also access the capital markets.

Apart from the power grid, another sector which had recently been gaining in altitude was the airline sector, helped by the end of the war in Iraq without any airline-oriented terrorist incidents and an easing of fuel prices, as well as an equity upgrade for several major companies by Merrill Lynch. But that rise appears now to have stalled, with a trader saying that the carriers had "kind of plateaued," although he saw them "not giving back much" from recent gains, he suggested that investors might be in for some profit taking up ahead. He saw Continental Airlines' 8% notes due 2005, which had finished Tuesday at 82 bid, now offered at that level, and guesstimated that bids for the credit would be off at least a point or so, to the 80-81 area.

However, he saw American Airlines parent AMR Corp.'s 9% notes due 2012 continuing to hover around 57 bid/58 offered, a relatively strong showing for the bonds of the beleaguered Number-One U.S. airline's owner.

At another desk, a trader said the big move that he had seen was weakness in Delta Airlines debt. He quoted the Atlanta-based carrier's 7.80% notes as having nosedived all the way down to 71 bid/74 offered from prior levels at 78, and its 8.30% notes having likewise quickly descended to 61 bid/64 offered from 70.

"The market just went crazy on this," he said, but acknowledged that there didn't seem to be any especially negative fresh news out on the company.

But at another desk, a trader was more conservative in his estimate of Delta's decline, quoting its 6.65% notes at 92.5 bid/93.5 offered, down a point-and-a-half.

One market observer offered that with the airlines' still riding the cusp of financial disaster, despite the optimistic Merrill outlook, "I don't think anyone can really know" what the bonds are actually worth.

Delta shares lost 82 cents (5.39%) to land at $14.39 in NYSE action, on slightly heavier-than-usual volume of 4.4 million, amid a general single-digit percentage retreat among the shares of other carriers such as AMR, Continental and Northwest Airlines.

Back on the ground, Lucent Technologies Inc. bonds were "a little weaker," a trader said, its 7¼% notes due 2006 dipping a point to 93.5 bid/.94.5 offered, while rival telecommunications equipment maker Nortel Networks Inc.'s 6 1/8% notes due 2006 were half a point lower at 96.5 bid/97 offered.

But while the phone gear companies were easing a bit, butter-maker Land 'O Lakes' bonds were churning upward; "we've seen a little run-up there, believe it or not," a trader said, quoting the Arden Hills, Minn.-based dairy products company's 8¾% notes due 2011 as having firmed to 70 bid/72 offered from 66 bid/67 offered a week ago, while its 7.45% notes due 2028 improved to 22 bid from 17 a week ago.

But despite that particular tasty spread, the trader further opined that for the market overall, "it looks like the party is over. We were definitely seeing paper for sale."

For the second day in a row high yield primary sources reported sensing that the market may be taking something of a "breather." And those sources freely admitted that when AMG Data Services rolls out its funds flows numbers for high-yield mutual funds Thursday evening people who follow the market will be standing by watching with bated breath.

The hectic pace at which the primary market has been running through the first seven days in May tapered slightly on Wednesday.

One deal - a downsized one - priced and three new deals appeared, one of them split-rated.

French container ship firm CMA CGM SA hoisted up slightly less money from investors than it had intended, as it priced a decreased offering of €100 million of 9 7/8% 10-year notes to yield 9.995%.

Meanwhile Key Energy Services announced plans to sell $150 million of 10-year notes on Friday, Norske Skog Canada was heard to be bringing a $100 million add-on to price Thursday afternoon and Semco Energy, Inc. will kick off the roadshow for its split-rated $300 million five- and 10-year notes on Thursday.

For the second consecutive session Prospect News heard cautionary tones sounded by its primary market sources on Wednesday. The red hot high-yield sector, one source suggested, might be poised to take something of a "breather."

Ever since it hit the newswires at the beginning of the week, market sources have been talking about billionaire investor Warren Buffett's pronouncement in an interview with CNBC that high yield at present is not as attractively priced as it had been previously. Most sources downplayed the impact that the highly influential money manager's observation will have with investors who have been inundating the junk bond market with cash for weeks on end.

However some of those sources nevertheless allow that it will be downright interesting to see whether Buffett's pronouncement will possibly register an impact on the volume of cash that has been flowing into the market.

"It's not going to be a surprise if we see some positive numbers on Thursday," one source said. "But it will be a surprise if we see a billion-dollar inflow.

"Right now there is a lot of international money coming into the market, a lot of European high yield names," the official added. "And granted, the U.S. economy is in the doghouse, but everybody else is in the same shape. So where are you going to get some yield? I think that is why people are coming to the U.S. high yield market.

"I think the market is going to run for a little while yet. The energy paper has had a spectacular comeback: the AES paper, Calpine. It's too impressive.

"Right now there is way too much money in the market. When you start seeing the weak credit come into the market - the triple-Cs, the weak single-Bs - it's a good indicator that there is too much liquidity. There's no way they could have come back in October."

This source suggested that come Memorial Day, if not sooner, it would not be surprising to see high yield take a bit of a breather.

Although the primary market may not have paused Wednesday the session's pace was decidedly easier than had been the case during the first two sessions of the present week.

French container shipping firm CMA CGM priced its downsized €100 million of 9 7/8% senior notes dues May 15, 2013 (B1/BB-) at 99.25 on Wednesday to yield 9.995%, coming at the wide end of the 9¾% area price talk. It had been planned at €150 million. Citigroup was the bookrunner.

Three new offerings appeared on Wednesday.

Key Energy, the Midland, Texas-based onshore oil well service company, announced plans to sell an off the shelf offering of $150 million 10-year senior notes on Friday via bookrunners Lehman Brothers and Bear Stearns.

Vancouver, B.C.-based paper-maker Norske Skog Canada plans to price a $100 million add-on to its 8 5/8% notes due June 15, 2011 (existing ratings Ba2/BB) on Thursday afternoon via Merrill Lynch & Co.

And the roadshow begins Thursday for a split-rated offering from Semco Energy, Inc. of $300 million of senior notes in tranches due 2008 and 2013 (BBB-). Credit Suisse First Boston will do the bookrunning on the deal that is expected to price mid-week during the week of May 12.

Also on Wednesday price talk of 11¾%-12% was heard on Evergreen International's $225 million of seven-year senior secured second lien notes (B-). The McMinnville, Oregon-based air cargo shipping firm's deal is expected to price on Thursday morning via Morgan Stanley.

And talk also emerged Wednesday on an emerging markets corporate deal: Russian dairy and juice producer Wimm-Bill-Dann Foods' new offering of $150 million of five-year senior notes were heard talked at 8½% area, with pricing expected on Thursday. UBS Warburg is the bookrunner.

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