Cable sector dropping while telecommunications are heading up in secondary trading

By Sara Rosenberg

New York, April 26 - The cable sector has seen somewhat of a drop in secondary trading recently with Adelphia Communications Corp. and Charter Communications Inc. being some of the more visible losers. Meanwhile telecommunications sector has recently gained some upwards momentum as has been illustrated by the performance of bank loan paper from companies such as XO Communications Inc., McLeodUSA Inc. and Level 3 Communications Inc.

Charter Communications, according to a market professional, had a bid/offer in the high 94's to the low 95's. Adelphia Communication's, bid/offer, which has gone down steadily over the past week, fell just below Charter's on Friday, the professional added.

"The cable market is getting smacked around," the professional said. "Everything is getting beaten up at the same time. They have a lot of debt in a lot of peoples' hands. There are more sellers than buyers, which is pushing the price down."

On the flip side, telecommunications has seen as marked improvement in trading levels. XO Communications was bid at around 70, McLeodUSA was bid at around 71 and Level 3 Communications was bid at around 72, according to the professional.

"Telecom is jumping up a couple of points because people are more comfortable with the restructurings," he explained. "Telecommunications as a whole is just better bid."

McLeodUSA announced its emergence from Chapter 11 on April 17 at which time the company entered into a $110 million revolving credit facility, which may be increased to $160 million, due May 31, 2007. In addition, the company sold its directory publishing business to Yell Group Ltd. for $600 million and received $175 million from Forstmann Little & Co. in connection with the sale of new common stock and warrants to purchase new common stock. Under the reorganization, the company had to distribute $670 million in cash to its senior noteholders, new Series A preferred stock, warrants to purchase new common stock and new common stock to its old preferred shareholders.

XO Communications on April 16 announced that despite the expiration of its forbearance agreement on its secured credit facility lenders are not expected to call in the loan due to continued recapitalization negotiations. "Presently, we are continuing our discussions with our lending institutions, holders of our senior unsecured notes and prospective investors - including the investment group being led by Carl Icahn," a company statement said.

As for the health, industrial and food sectors, they are pretty much trading at par to par-plus. "Any performing asset will probably be at par-plus," the professional said.

Most of the new deals fall into that premium trading level as well. Isle of Capri Casinos Inc. traded at approximately 101 to 1011/4, while Associated Materials Inc. traded at around 101 to 1011/2, the market professional said. Even Riverwood International Corp. has been trading at 100½ to 101 because of its asset coverage, despite the fact that it's B-rated by Standard & Poor's.

"There are a lot of loan investors who are sitting on cash from repayments and they're looking to buy," the professional said. "They want to put their cash to work. There are names that are rallying for no reason other than people are bidding them up."

In the primary, AFC Enterprises Inc. was scheduled to hold its bank meeting Friday regarding its new $275 million credit facility, according to a company spokesman. JPMorgan Chase and Credit Suisse First Boston are co-lead arrangers for the deal. The new credit facility is expected to close in mid-May.

The loan is anticipated to consist of a $75 million five-year term A tranche, a $125 million seven-year term B tranche and a $75 million five-year revolver, according to the spokesman. Expected interest rates are not currently being disclosed.

Proceeds will be used to refinance the Atlanta, Ga. restaurant, beverage and coffee roasting franchise company's existing credit facility, which has a balance of approximately $80 million outstanding, retire its existing 10.25% senior subordinated notes and for general corporate purposes.

The company was not immediately available to comment on the outcome of the meeting.

Calpine Corp.'s new $600 million two-year term loan B (Ba3/BB+) was oversubscribed once interest rates and collateral changed, according to a syndicate source. The credit facility is scheduled to launch to "smaller retail investors" in early-May at a discount of 100 basis points, the syndicate source said. Salomon Smith Barney, Deutsche Bank and Credit Suisse First Boston are the lead banks on the deal.

Initial price talks had the term B at an interest rate of Libor plus 275 basis points. On Wednesday, the interest rate revised upwards to Libor plus 375 basis points, according to the syndicate source. The loan was originally secured by interests in the company's natural gas properties, the Saltend power plant in the United Kingdom and equity investments in nine U.S. power plants. The San Jose, Calif. power company recently added mortgages on gas properties as collateral.

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