Charter, Nextel, Calpine all off slightly in reaction to weaker bond market

By Sara Rosenberg

New York, Feb. 5 - The softening in the high-yield bond market continued to reflect in the secondary bank loan market on Thursday with many names dropping slightly including, Charter Communications Inc., Nextel Communications Inc. and Calpine Corp.

"The weaker tone to the high-yield market spilled into our market," a trader said. "It makes the market feel squishy."

Charter's term loan B bank debt was quoted at 98 bid, 98½ offered, according to the trader, down about a quarter of a point from Tuesday's levels of 98¼ bid, 98½ offered and about half a point lower form Monday's quotes. The St. Louis cable company's term loan A was quoted at 96½ bid, 97 offered.

"Charter's 8 5/8% bonds at one point were trading at 91. Today they're probably 851/4, 861/4. The bank debt is off like a quarter of a point," the trader said.

Nextel's bank debt was quoted at par 7/8 bid, 101 3/8 offered, according to the trader. On Tuesday the paper was seen trading at 101 1/8, and on Monday the paper was quoted at 101 1/8 bid, 101 3/8 offered.

"Nextel's new 6 7/8% traded close to 109. They opened at 105 5/8, 106 1/8 this morning. The bank is off about an eighth," the trader added.

And, Calpine's bank debt was once again seen as softer after strengthening earlier in the week. The second lien loan was quoted at 97¾ bid, 98½ offered, according to the trader. On Tuesday, the debt was quoted at 98½ bid, 99 offered up by about a quarter to a half a point from a dip late last week on market technicals.

Furthermore, Calpine Construction Finance Co. II LLC's revolver was quoted at 98 bid, 99 offered by a trader, compared to Wednesday's levels of 98½ bid, 99 offered, as investors continue to show their uncertainty about the refinancing reaching completion.

"It's bid at 98, but I'm not paying 98 for it," a trader said. "Say you bought a whole bunch of this at 88 or 91. Say there's a 99% chance it will get refinanced. But, say there's a 1% chance it doesn't get refinanced. Are you going to risk 20 points if it doesn't get done compared to gaining one point if it does? That's the kind of trade that people get fired for.

"There are lots of questions about this [refinancing]," the trader continued. "There's way too much debt on it. I think the bank loan gets done no problem. First lien there's about $80,000 of debt per megawatt. Second lien bonds there's about $275,000 of debt per megawatt and you can't say you'll necessarily get covered there. It's the second lien that's the issue. And, without the bonds getting done the bank debt doesn't get done."

On Wednesday, the San Jose, Calif., power company revealed that its wholly owned subsidiary, Calpine Generating Co. LLC (previously CCFC II) would be coming to market with about $1.3 billion of non-recourse first priority secured institutional term loans and about $1 billion non-recourse second priority secured notes. Deutsche Bank is the left lead on both transactions.

The term loans and the bank debt would be used to refinance amounts outstanding under the $2.5 billion CCFC II credit facility that matures in November. Currently there is about $2.3 billion in outstanding debt under the CCFC II facility including letters of credit.

The term loans and revolver will be secured, through a combination of stock pledges and direct asset liens, by Calpine Generating's power generating facilities and related assets. None of the debt will be guaranteed by Calpine Corp.

Calpine Generating also plans on getting a new $200 million three-year revolver that will be used to complete power generation facilities that are still under construction.

Agco unchanged on inquiry

Agco Corp. bank debt held steady at 101½ bid, 101 7/8 offered despite news of an informal inquiry by the Securities and Exchange Commission into the company's accounting for revenue recognition (particularly bill and hold transactions), sales and sales returns and allowances, plant and facility closing costs and reserves, and personal use of corporate aircraft, according to a trader.

"It's just an inquiry. People tend to overreact. It stayed flat," the trader said.

The company has responded to the inquiry "and intends to cooperate fully with the SEC going forward," a company news release said.

Agco is a Duluth, Ga., manufacturer and distributor of agricultural equipment.

AMF Bowling launches

AMF Bowling Worldwide Inc.'s $175 million credit facility (B1/B) launched on Thursday with pricing of Libor plus 300 basis points on both the $40 million five-year revolver and the $135 million 51/2-year term loan B, according to a syndicate document.

Merrill Lynch and Credit Suisse First Boston are the lead banks on the deal with Merrill listed on the left.

Proceeds, combined with proceeds from a proposed $150 million high-yield bond offering also via Merrill and Credit Suisse First Boston, will be used to help support the previously announced leveraged buyout by an affiliate of Code Hennessy & Simmons LLC.

Under the terms of the merger agreement, AMF shareholders will receive $25 in cash for each common share. The cash consideration paid to AMF shareholders may be increased by $0.01 per share per day under certain circumstances if the merger has not closed by a date to be determined. In addition, following the consummation of the merger, the holders of any unexercised AMF Series A warrants will be entitled to receive the difference between the merger consideration and the exercise price.

The transaction is expected to close in the first quarter of calendar 2004.

AMF is a Richmond, Va., owner and operator of bowling centers, and manufacturer and marketer of bowling and billiards products.

Qwest revolver closes

Qwest Services Corp., a subsidiary of Qwest Communications International Inc., closed on its new $750 million senior secured revolver due in 2007 (B2). The facility was undrawn at closing.

J.P. Morgan Securities Inc. and Wachovia Securities Inc. arranged the deal, with Bank of America as administrative agent, JPMorgan Chase Bank and Wachovia Bank as co-syndication agents, and Lehman Commercial Paper and UBS AG as co-documentation agents, according to a company news release.

In addition, Qwest Communications completed its previously announced Rule 144A offering of $1.775 billion aggregate principal amount of senior debt securities consisting of five-, seven- and 10-year notes.

With the completion of these transactions, Qwest Services paid off in full and terminated its existing credit facility that totaled $750 million.

"These transactions enabled us to further modify our maturities, while allowing us to benefit from access to favorable market conditions," said Oren G. Shaffer, vice chairman and chief financial officer, in the news release. "Combined with the added assurance of the revolving credit facility, this marks another important step in our ongoing efforts to improve the company's overall financial flexibility."

Qwest is a Denver telecommunications company.

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