At least one convertible note holder is hoping that Charter Communications uses any additional proceeds from its upcoming high-yield issue to sweeten its tender offer for most of the $1.38 billion in convertible bonds. The company has announced that it will issue $1.7 billion in new senior notes to buy back the convertible bonds, along with a combined $785 million of straight bonds and bank debt. However, people close to the deal say an additional $1 billion may be tacked on (BW, 7/21). David Andersen, a Charter spokesman who declined to discuss the deal two weeks ago, declined to comment again.
The convertible issues represent Charter's most immediate liquidity hurdle, and the investor reasons that Charter will want to do whatever it can to take out those notes. Aryeh Bourkoff, fixed-income and equity cable analyst at UBS Securities, says a sweetened tender offer for the convertible notes is a possibility. "But just as likely a scenario is that the company decides to tender for more straight bonds given the high relative coupon at current levels and its focus on generating incremental financial flexibility. Either way, the company's ability to finance itself is a strong positive for the capital structure, and we continue to recommend the bonds and converts at current levels," he says. Charter's benchmark 8 5/8% notes of '09 (CCC-/Ca) were bid at 77.5 late last Wednesday.