A mass of Charter Communications' various credit facilities traded in the last couple of weeks as one bank was said to be paring down its exposure to the name in anticipation of the Shared National Credit (SNC) exam. The bank believes that there is a chance that Charter will have to restructure and will be deemed a non-performing loan by the exam, said one trader. Pieces of Charter's operating company facility and Falcon Cable facility were said to have traded in the mid 80s to low 90s depending on the tranche.
The SNC exam is conducted annually by the Federal Deposit Insurance Corporation, the Federal Reserve Bank, and the Office of the Comptroller of the Currency to ensure consistency among the federal banking regulators in the classification of large syndicated credits. The credits are reviewed and a quality rating is assigned and reported to all participating banks. Banks must publicly report the amount of its loans that are classified or considered non-performing and take reserves against those credits. One trader noted that the SNC exam classified Adelphia Communications' Frontier Vision as a non-performing loan, which hurt a lot of banks last year.
Charter has been the subject of restructuring speculation over the last couple of months. While many market players believe that the loans are worth par in the end, there is still a lot of uncertainty that surrounds the company. Traders said the name has been ticking up with the overall market, so it was a good time to sell out of the debt without taking as big of a loss.