Charter dips on rumors but rebounds as talk proves false

By Sara Rosenberg

New York, Oct. 4 - Charter Communications Inc. traded down by a point early in the day on Friday as rumors that the company's chief financial officer was going to resign and liquidity was limited circulated around the marketplace, according to a trader. However, the bank debt bounced back up, regaining its losses by late afternoon as market participants discovered these rumors to be false, the trader added.

The St. Louis, Mo. cable operator's term loan B bank paper was quoted in the high 85 to 86 region following its recovery.

All in all, Charter had a fairly active week as levels took a mini roller coaster ride. The debt was quoted about a quarter of a point higher to a bid of 87 1/8 and offer of 88 for most of Tuesday on positive stock performance, then dropped about two points to a bid in the 85 range and an offer in the 86 range late Tuesday into Wednesday after the company said it expects to fall short of earlier third quarter operating cash flow guidance primarily due to basic analog customer losses. On Thursday the loan finally began to settle it at its new levels and then Friday was hit with the unfounded rumors, once again creating a move in the bank quotes.

As was previously expected, AT&T Corp. broke in the secondary market on Friday with quotes in the low 90's range, a trader said. Despite having a senior unsecured debt rating of Baa2, the loan is receiving attention from leveraged players due to its below-par trading levels and enormous size.

The company's credit facility expires in one-year and is sized at $4 billion, "of which 25% is gone in three months," the trader said.

AT&T is a New York, N.Y. provider of communications services.

Meanwhile, AES Corp.'s $1.6 billion credit facility appears to be being kept on the quiet side, according to market sources. After Prospect News questioned many market participants, it became apparent that details including the loan's timing and lead banks are not widely known.

"I think there's a reason why they're trying to lay low with this deal, "one market participant told Prospect News. "It's going to be a tough sell. It's an energy company and I think their new notes are pari passu with the bank debt."

The company announced on Thursday an exchange offer for up to $500 million of notes for cash and new senior secured notes. The new notes and the new credit facility will be secured equally by first-priority liens on all the capital stock of directly owned domestic subsidiaries and 65% of the capital stock of certain directly owned foreign subsidiaries and on certain inter-company receivables, inter-company notes and inter-company tax sharing agreements.

The new credit facility will be used to replace the $850 million revolver due March 2003, the $425 million term loan due August 2003, the $262.5 million term loan to AES subsidiary AES EDC Funding II LLC due July 2003 and the £52.3 million letter of credit facility, according to a news release.

According to some market sources, the Arlington, Va. power company's loan launched on Thursday; however, according to others, the loan was pushed off until next week. Citibank is said to be the lead bank on the deal but no confirmation of this information was obtained.

Coming up on Monday is the long awaited institutional bank meeting for QwestDex's approximately $1.5 billion credit facility. The loan is anticipated to consist of a 61/2-year term loan B sized at about $700 with an interest rate of Libor plus 350 basis points and a six-year pro rata portion sized at approximately $800 million with an interest rate of Libor plus 300 basis points, a source close to the deal previously told Prospect News. "All of this is subject to change," he warned.

The directory services company's deal has been presented to top-tier agents and some larger institutions already, sources say.

The only concern amongst investors at this time is that when QwestDex West hits the bank loan market next year, the QwestDex East paper might suffer, a fund manager explained, adding that investors are trying to obtain a guarantee that if the West loan prices differently than the East loan due to a change in market conditions, etc. the East loan will be adjusted to match.

JPMorgan, Bank of America, Deutsche Bank, Lehman Brothers and Wachovia Securities are the lead banks on the deal.

Proceeds will be used to help fund the leveraged buyout of QwestDex by The Carlyle Group and Welsh, Carson, Anderson & Stowe.

QwestDex is the first of a handful of large new loans that have kept investors standing quietly at the sidelines in anticipation, creating somewhat of a quiet market environment.

"The same stuff we have on the calendar now, we had on for the past few months," a sell side source said. "I hope it picks up before the end of the year. It is close to year-end and people have limited capital so they're probably holding on to it [for the large deals]."

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