Adelphia weakens after bankruptcy filing; WorldCom see little trading on investor uncertainty

By Sara Rosenberg

New York, June 27 - Despite the clarity that market participants have finally obtained on Adelphia Communications Corp.'s situation, there was a small decline in the company's bank loan paper following its Chapter 11 filing after-hours on Tuesday. The drop is attributed to outside selling pressure that is being put on the market by CLOs.

Meanwhile, WorldCom, Inc. is experiencing little trading activity because people are waiting to see how the troubled telecommunications company's story pans out.

Adelphia Communications Corp. was slightly lower with the Olympus loan bid at 82 and offered at 85 and the Century loan bid at 75 and offered at 77, according to a fund manager. The Coudersport, Pa. cable company has seen a decline in price since it filed for chapter 11 bankruptcy protection. On June 21, the Olympus loan was bid in the mid 80's and offered in the high 80's and the Century loan was in the low 80's,

"Historically, [after a bankruptcy filing], loans trade up because there's some certainty to the situation and the company is under the watchful eye of the bankruptcy court," the fund manager said. However, lately, due to outside factors and market technicals loans have been trading down following chapter 11 filings.

"There's pressure from CLOs," the fund manager explained. "There's so much debt and everyone owns it. Even if they're not selling all their debt, they are trimming it."

CLOs operate under limitations as to how much low-rated paper they can hold.

WorldCom was bid at 20 and offered at 22 on Thursday, according to a trader. On Wednesday morning, the bank debt traded at 22 and continued to drift lower to finish the day in the mid-teens, according to an investment banker.

"I don't think anybody is trading it because of all the uncertainty," the trader said. "The bid is all over the place."

The Clinton, Miss. telecommunications company saw a major decline Wednesday in secondary bank loan prices from trades in the low 70s on Tuesday, following news of a large accounting discrepancy. Due to transfers discovered in an audit, the company will restate its earnings, reducing EBITDA by $3.055 billion in 2001 to $6.339 billion and $797 million for the first quarter of 2002 to $1.368 billion The Securities and Exchange Commission is investigating the matter and the Justice Department is also getting involved.

XO Communications hosted a big conference call on Thursday to talk about the amendment to its credit facility that was filed in a Form 8-K on June 17 and entered into on June 11. Under the amendment trading is basically stopped on the company's bank loan since approval by 51% of the bank group and approval by the company is needed in order to sell, assign or transfer any interests in loans, notes or other obligations. The purpose of this amendment, according to market sources, is to block Carl Icahn from taking over the Reston, Va. telecommunications company.

"Most institutional lenders and trading desks are annoyed," the fund manager said. "Banks are fine."

"The conference call was just to talk about it but nothing will come out of it," the fund manager added. "It was a [complain] session."

In the primary, Alliance Laundry Systems LLC's held a bank meeting regarding its new $243 million credit facility (B), which will be used to refinance existing debt, according to market sources. Lehman Brothers is the lead bank on the deal.

The Ripon, Wis. commercial laundry manufacturer's loan consists of a $193 million five-year term loan B with an interest rate of Libor plus 350 basis points and a $50 million five-year revolver with an interest rate of Libor plus 350 basis points, market sources said.

"We're going to turn down Alliance," a fund manager said. "There are some lenders that have lenders fatigue so they'll open the deal up to new lenders. It won't be a big blowout but it will get done because there's enough demand out there for bank paper."

The syndicate was not immediately available for comment.

Also on Thursday was Cinemark Inc.'s bank meeting for a new $250 million credit facility (BB-), according to market sources. Lehman Brothers is the lead bank on the deal, which only went to a select group of institutions, according to a fund manager.

The Plano, Tex. movie theater operator's loan consists of a $150 million six-year term loan B with an interest rate of Libor plus 300 basis points, a fund manager said, and a $100 million five-year revolver with an interest rate of Libor plus 300 basis points. Proceeds combined with proceeds from an initial public offering will be used to refinance existing debt.

In follow-up news, Senior Housing Properties Trust said it closed on a new $250 million unsecured revolving credit facility. The loan matures on Nov. 30, 2005 with an option to extend for one year. Interest on the Newton, Mass. real estate investment trust's loan is based on leverage or credit ratings. Initially the loan bears interest at Libor plus 145 basis points, the company said in a press release.

Wachovia Securities Inc. acted as joint lead arranger and sole bookrunner. Wachovia Bank acted as administrative agent. Dresdner Bank AG acted as joint lead arranger and documentation agent. ING Capital LLC was syndication agent. UBS Warburg was documentation agent. And Citizens Bank and KeyBank were both lenders.

The new loan replaces a secured facility, which was due in September 2002 and had an interest rate of Libor plus 200 basis points.

"We are pleased to replace our expiring revolving credit facility with a new, extended term, unsecured, revolving credit facility at a lower interest rate," said David J. Hegarty, president, in the news release. "At inception, the new credit facility has $26 million outstanding and $224 million is available to be used for new investments. In addition, the new credit facility may be increased by up to an additional $250 million in certain circumstances to accommodate a large transaction or otherwise."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.