Bresnan Communications' $400 million credit backing the acquisition of subscribers from Comcast is on its way home as the cable sector finally seems to be coming back into favor with lenders as long as the price is right. The company weathered close to a year-long effort to finalize the entire transaction and ended up increasing its spread over LIBOR by 50 basis points and offering a steeper original issue discount. Margot Bright, v.p. of finance for Bresnan, said things are looking better for the sector. "The cable sector is looking quite good," she said, citing stronger free cash flow year-end reports from other companies in the industry. "The Charter [Communications] overhang is a little bit over," she said, adding that the Adelphia [Communications] shocks are also subsiding.
Still, the $225 million "B" loan did not find it easy going. The "B" was flexed up from LIBOR plus 33/4% to LIBOR plus 41/4%, while an original issue discount widened from 11/2% to21/2%. "We expected that if we didn't get a Ba3 from Moody's [Investors Service] that we would be moving the discount," she noted. The deal received a split BB-/B1 rating. "Would we have preferred to issue it at par? Certainly," she added, pointing to the market's demand for fatter pricing incentives.
A combination of factors, including last summer's anti-cable loan market, a weakened bond market and changes to the acquisition's structure, prolonged Bresnan from closing out the credit backing the $675.4 million purchase of 317,000 basic cable subscribers (LMW, 1/20). "I think over the summer [the credit] would have been more difficult [to complete], right on the heels of the Adelphia issue," Bright said, also noting the market affects from the Enron and Tyco International bombshells. The acquisition plans were announced in April 2002 and leads J.P. Morgan and TD Securities iced the credit plans early last fall. Wachovia Securities, Bank of New York and Société Générale joined the lead underwriting group as the deal resurfaced last month. Lead bankers either declined to comment or did not return calls.
The credit's pro rata portion, which Bright said had not changed, includes a $100 million revolver and a $75 million delayed-draw "A" loan priced at LIBOR plus 31/2%.