Charter bank debt dips on lender concerns; Nextel strengthens on good company performance

By Sara Rosenberg

New York, Aug. 19 - Charter Communications Inc.'s bank paper weakened in secondary trading Monday possibly in response to Friday's announcement of a federal investigation, according to market sources. Meanwhile, Nextel Communications Inc. felt stronger on recent favorable company performance, however, bank debt levels continue to be restricted by market saturation.

Charter Communications dropped to a bid around 84 and an offer around 86, from a previous bid of 86 and offer of 88, according to a fund manager.

"This is easily the lowest I've seen it," the fund manager said.

On Friday, the St. Louis, Mo. cable company announced that the United States District Attorney's Office is requesting documents relating to Charter's current and disconnected customers, and policies and procedures relating to the capitalization or expense of various costs and related matters.

Following the news, bonds "didn't move down that much, but obviously people are a little nervous though, because the stock is down on a day when most stock are up," the fund manager said. On Monday, Charter's stock closed at $2.34, down $0.19 or 7.51%.

Banks are expressing concern over the situation as well, despite the overly secured nature of the company's credit facility.

"Banks may be influenced by what happened with Adelphia, where they thought they'd get post-petition interest and now they think they may not get post-petition interest," the fund manager explained. "It's psychological. What looked to be secured bank debt didn't turn out that way. With the criminal probe, if Charter gets pushed into Chapter 11, maybe there won't be post-petition interest. We saw it happen with one cable company, people think that maybe it could happen to another one."

Nextel Communications' term loan A paper was quoted as slightly stronger at around 80/81 from 78/79, the fund manager said.

"A lot of people have been putting buy recommendations on the stock recently," the fund manager said. "The stock has consistently crept up. The bonds have done really well in the past few days, going from around 63½ to around 69. There's a good mood."

The Reston, Va. wireless company's term loan B and C were quoted with a bid of 83 and an offer of 841/2, which is the same as it was last week, according to a trader. "They got stronger on Thursday and Friday, after the reduction of debt," the trader added. On Wednesday, the company announced that since June 30 it has retired an additional $733 million principal amount of debt and preferred securities bringing the total of retired debt this year to $1.83 billion.

"Nextel has been performing," the trader said. "But the Nextel story is as much about technical overhang as it is about fundamental levels.

"There's a ton of [Nextel bank debt]," the trader explained. "That's why the prices are depressed. There's so much paper that there's nowhere to go with it when you own it." Currently, the term A is $1.7 billion, the term B is $900 million, the term C is $900 million and the term D is $1 billion, according to the trader. "And the wireless sector has been pummeled," he added.

In other news, Agrilink Foods Inc., a Rochester, N.Y. frozen vegetables company, closed on a new $470 million credit facility, consisting of a $200 million five-year revolver with an interest rate of Libor plus 275 basis points and a $270 million seven-year term loan B with an interest rate of Libor plus 300 basis points.

JPMorgan led the syndicate, which is composed of over 40 institutions, according to a company release.

Proceeds combined with an investment by Vestar Capital Partners are being used to retire existing bank indebtedness.

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