El Paso pushed lower on market saturation; Charter continues move north in better bid cable sector

By Sara Rosenberg

New York, March 11 - El Paso Corp.'s new $1.2 billion two-year term loan was down on Tuesday as the market attempts to digest what can only be described as a large amount of paper. Meanwhile, Charter Communications Inc. continued its upward movement, basically in response to an overall better bid cable sector.

El Paso's term loan was bid at 98½ and offered at 99, according to a trader, who attributed the fall to market technicals.

On Friday, the Houston provider of natural gas services bank paper was quoted in the low-to-mid 99's, with one trader saying that he saw a Street trade at 991/4. The loan was issued at 981/2.

The term loan, which launched on Feb. 24 via Credit Suisse First Boston and Salomon Smith Barney, was priced at Libor plus 625 basis points.

El Paso is not the only name that has recently moved lower in the secondary after a brief rally upon breaking for trading. For example, TRW Automotive's term loan B, which was upsized to $1.1 billion from $900 million, sold at a 99½ and then traded as high as 100.75 on its first day, according to a Bank of America Securities research report. "The market then appeared to become saturated with the name as pro rata lenders dumped their TLB allocations and some of their TLA, sending the trading level down to the mid-99s within days," the report said.

On Tuesday, El Paso announced that El Paso Production Oil & Gas Co. agreed to sell its interest in the Rosa Federal Unit located in San Juan and Rio Arriba Counties, New Mexico to Sacramento Municipal Utility District for $135 million. The sale is expected to close on or before March 31, 2003.

"This sale supports El Paso's previously announced 2003 five-point business plan, which includes exiting non-core businesses quickly but prudently, and strengthening and simplifying the balance sheet while maximizing liquidity. With this announcement, El Paso has now either closed or announced sales under contract of approximately $1.5 billion for 2003, approximately 45 percent of the company's asset sales goal of $3.4 billion for calendar year 2003," a news release said.

Despite the company's forward momentum on its business plan, the bank debt was unaffected by the announcement simply because the asset sale was already anticipated by the marketplace, the trader added.

Charter Communications' bank debt continued to rally, with quotes in the mid 86's on Tuesday, according to a trader. On Monday, the loan traded at 85 7/8, up about a point from Friday's levels.

Overall the cable sector in general has seen an improvement recently, with names like Adelphia and Charter being quoted higher over the past couple of days.

"The whole sector is better bid," the trader said. "The bonds have rallied for the past week or two. Now they're settling in and the bank debt is catching up."

Charter is a St. Louis cable company.

PanAmSat Corp. was "trading well" on Tuesday, with the bank debt being quoted about ¼ of a point higher than previous levels, according to one trader. The loan was reported as firm with levels in the mid-to-high 99's.

A second trader, however, reported the bank debt at basically the same levels with trades taking place at 99 5/8. "It's kind of the same. There's no negative news, no positive news," the trader added.

PanAmSat is a Wilton, Conn. provider of video, broadcasting and network services through satellites.

As for the primary, many market participants have reported an overall slowdown in new issues recently, with most sources attributing the lack of activity to the problems in the Mid East.

"I don't have anything on my forward calendar," one fund manager told Prospect News. "I think a big part of it is pre-war slow down. Part of it is timing."

"I think people are sitting tight to see what happens with this whole war thing," a sell-side source said.

And, the Bank of America Securities research report stated: "Under the specter of potential war with Iraq, the high yield loan forward calendar appears to be slowing. Several jumbo deals worked their way through the calendar in February, leaving most arrangers pondering where the next big deal will come from. The slowdown in market activity is not limited to the loan market, with the high yield bond pipeline also taking a break from the large transactions of the first two months of the year, in favor of many smaller deals. The average deal size on the high yield bond forward calendar has decreased from $350 million for the first two months of the year to only $212 million today."

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