Charter Term Loan Trades Lightly
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Charter Term Loan Trades Lightly

A mere $150-200 million of Charter Communications' $5 billion term loan traded on its break in the secondary market. It broke at 100 1/4 and continued to trade in the 100 1/4-100 1/2 range.

A mere $150-200 million of Charter Communications' $5 billion term loan traded on its break in the secondary market. It broke at 100 1/4 and continued to trade in the 100 1/4-100 1/2 range. One trader said the deal probably did not trade actively because it is a refinancing of two Charter term loans --a $3 billion "B" loan and a $2 billion "A" loan -- that have been rolled into one. "It is not really a new deal so it doesn't trade like a new issue," he said.

JPMorgan, Bank of America and Citigroup lead the deal, which also includes a $300 million add-on revolver, which has yet to close. The deal was flexed down to LIBOR plus 2 5/8% from LIBOR plus 2 3/4% just before the break. One trader said the cheaper pricing on the loan may explain why trading was light. "At this tightness we are starting to see push back," he said, commenting on investors' appetite for the deal in the secondary market. The deal contains 101 soft call protection.

Despite the lower pricing, a trader said Charter is one of the more compelling deals in the market. "Given the coupon that it has in this market, it could trade at 101." He added that he expects collateralized loan obligations will buy into the loan. "It is a great asset for the CLOs. It is good collateral for them."

Charter refinanced its credit facility to extend debt maturities and improve liquidity. The previous term loan "A" was due to mature in 2010, while the term loan "B" was due to mature in 2011. The new term loan matures in 2013. It has a 1% annual rate of amortization, substantially lower than the steep amortization rates of 12.5% in 2007, 30% in 2008, 37.5% in 2009 and 20% in 2010, it had under the previous term loans.

A spokeswoman would not comment on the trading levels of the new term loan. She added that the $300 million add-on revolver may be increased by $50 million. The revolver, which is priced at LIBOR plus 3%, switches to a term loan after one year and will assume the same pricing as the $5 billion term loan.

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