Charter Communications bonds continued to trade up last week as investors took heart in the company's improved liquidity following its recent bank deal. Its 10 3/4% '09 bonds traded up three points to 76 1/2 last week and have gained 10 points over the past three weeks.
Charter entered into a new $5 billion bank deal at the beginning of April (CIN, 4/7) that substantially reduces amortization requirements by $20 million this year and by a whopping $240 million next year. Its bank capacity will also increase by $300 million. A spokeswoman said the deal is due to close by the end of this month.
An analyst at a distressed debt investment firm said the new bank deal has helped Charter stave off bankruptcy. Had the company not obtained the new financing with more favorable terms, the steep amortization on the old bank deal could have forced it out of business, she said.
Despite the short-term boost, a Moody's Investors Services report says the new bank deal improves Charter's liquidity in the medium term, but that its operating cash flow can not reach levels sufficient to support its debt over the longer term. Charter has leverage of more than 10 times debt to EBITDA.