Charter Communications' $6.5 billion refinancing is being structured as an amendment to the company's existing $5.1 billion credit facility to allow collateralized loan obligations to roll in. Charter's existing bank loan is rated B2, but its senior implied rating is Caa1, which creates a problem for CLOs, said several buysiders. The amendment helps CLOs get around that problem because they can stay in deals--they are not signing onto anything new because technically it is not a new deal. Most CLOs can stay in downgraded deals, but cannot buy more of the debt, explained a buysider.
"On these refinancing repricing deals you are able to roll into the new facility. So you basically are keeping your existing loans but modifying terms," a buysider said. "It seems like a heck of an amendment," another buysider said. "They're putting together all different facilities, changing collateral, extending principal payments, raising spread. That's a new facility in my mind."
Another way around the ratings issue would be if Charter gets upgraded. "If somehow they get a ratings upgrade then it will be fairly easy to get done," a loan investor said. "It should do fairly well, especially if they can get the rating bumped up a notch," another investor noted. "We would hope that there is enough of an improvement that Charter actually gets upgraded."
The deal is not underwritten and is being done on a best-efforts basis so there is some risk that it will not be completed. But market participants said the loan is "trading like it's going to get taken out." Traders said the various loans under the Charter umbrella were changing hands in the 991/2-100 range.
The credit comprises a $1.5 billion revolver, $2 billion "A" loan and $3 billion "B" loan. Price talk is LIBOR plus 31/4% on the "B" loan and LIBOR plus 3% on the pro rata. The deal also includes a $1.5 billion second-lien secured bond.J.P. Morgan and Bank of America are leading the bank loan while Citibank and Credit Suisse First Boston are leading the bond piece. Syndication launched last Friday.