Adelphia moves up on proposed cable system sales; WorldCom ends firm after softening

By Sara Rosenberg

New York, May 9 - Bank loan market secondary activity witnessed the upward movement of Adelphia Communications Corp. Thursday as news of asset sales spread through the market. Meanwhile, WorldCom Inc.'s paper was in flux through out the day, first dropping due to the company's downgrade to junk status by Moody's Investors Service, then rising due to reassuring statements by the company.

Adelphia Communications Corp.'s bank loan paper partially recovered its losses of recent weeks in secondary activity Wednesday and Thursday in response to the announcement of proposed asset sales, according to a market professional. The paper was up about three points to trade at 95 bid, 96 offer.

Late Wednesday, the company announced that it will solicit formal offers for some cable systems including those in Southern California, Florida, Virginia and the Southeast, according to a company press release. In selling these assets, the company is hoping to reduce debt and deleverage the balance sheet.

In other news, WorldCom Inc.'s non-extendible bank loan paper due in June 2002 bounced around in the secondary, according to a trader.

The paper softened up a bit after Moody's downgraded WorldCom's senior unsecured issuer rating to Ba2 from Baa2. The downgrade reflects the company's decline in operating performance, expectations for continued weakness, substantial debt load that includes maturities within the next two years and its need to restructure its maturing credit facility and accounts receivable securitization program, Moody's said.

However, the bank loan paper proceeded to firm up late in the day after the company held a conference call reassuring people that the downgrade has no affect on liquidity because the company obtained a waiver on its accounts receivable securitization program. In addition to the waiver, WorldCom also announced that negotiations are taking place on replacing the existing $2.65 billion credit facility with a secured, larger, longer term loan. Talks between the company and its lending banks are anticipated to be resolved within the next 30 days, according to WorldCom officials.

The loan paper did not experience much trading, according to the trader, as the bid-offer spreads were wide Thursday. At the end of the day, the market was around 95, the trader added.

In primary activity, MGM Studios held a bank meeting for retail investors regarding its $1.5 billion credit facility. Bank of America, JPMorgan Chase and Fleet are co-lead arrangers. The loan is expected to close at the end of May or early June.

The loan consists of a $600 million six-year term B with an interest rate of Libor plus 300 basis points, a $600 million five-year revolver with an interest rate of Libor plus 275 basis points and a $300 million five-year term A with an interest rate of Libor plus 275 basis points, according to a syndicate source.

The stocks and assets of the Santa Monica, Calif. developer, producer and distributor of films and television shows secure the loan. Proceeds will be used to refinance the company's previous $1.5 billion credit facility.

According to the syndicate source, approximately five or six commitments were received ahead of the retail launch. The syndicate has been placing phone calls to institutions over the past week and a half.

The Borgata, a $1 billion entertainment resort under construction in Atlantic City, N.J., held a bank meeting regarding a new $187.5 million term loan B (B+/B2) priced with an interest rate of Libor plus 400 basis points and a maturity date of Dec. 13, 2007. CIBC is the sole lead arranger for the deal. The resort is being developed through a joint venture with Boyd Gaming Corp. and MGM MIRAGE.

Also, Boyd Gaming Corp., a Las Vegas, Nev. gaming company, held a bank meeting regarding its $500 million credit facility (Ba1/BB). CIBC is sole lead arranger for the deal.

The loan is expected to consist of a $400 million five-year revolver with an interest rate of Libor plus 250 basis points and a $100 million five-year term B with an interest rate of Libor plus 250 basis points. There is a commitment fee of 50 basis points on the revolver.

Proceeds will be used to refinance $200 million of senior notes due October 2003, according to a Securities and Exchange Commission filing.

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