Adelphia, Charter and WorldCom bank loans gaining strength in secondary

By Sara Rosenberg

New York, May 10 - Recently troubled names in the secondary bank loan market Adelphia Communications Corp. and WorldCom Inc. made a comeback due to the release of favorable company news, according to market sources - and Charter Communications Inc., previously suffering from guilt by association, enjoyed gains from its continuing linkage. But despite the improving feeling of strength, trading activity was light as investors and professionals alike digested recent company announcements and analyzed the various possible outcomes.

Adelphia Communications Corp.'s bank loan paper felt generally stronger Friday due to a company announcement earlier in the week that it authorized its financial advisors to solicit offers for some cable systems including Southern California, Florida, Virginia and the Southeast, according to a company press release. In selling these assets, the Coudersport, Pa. telecommunications provider is hoping to reduce debt and deleverage its balance sheet.

The bid on Olympus Communications LP, a subsidiary of Adelphia, was around 95 1/8, while the offer was around 971/2, a trader said. The paper didn't experience much trading due to the spread between the bid/offer. According to the trader, there are more people looking to buy than sell the paper and the views of the buyers and the sellers are different so the two sides are unable to reach an agreement. The buyers are taking a more conservative side, while the sellers think that asset sales and deleveraging will definitely occur, he explained.

Charter Communications Inc. strengthened slightly to trade at around 96 for the B loan, the trader said. The upward movement of the St. Louis, Mo. cable system operator's paper is due to Adelphia's recent progress. Charter was hurt because it was in the same sector as Adelphia and now it's recovering because of Adelphia, the trader explained.

WorldCom Inc.'s bank loan paper felt stronger Friday due to company announcements Thursday, according to a trader. The loans haven't been trading that much, though, as people are still trying to figure out all of the events of the past couple of days. Bid/offers have been all over the place Friday, the trader said, and the two can't seem to meet. WorldCom's $3.75 billion loan that expires June 30, 2002 has the tightest spread between the bid/offer since the loan is expiring and not being renewed. The $2.65 billion credit facility, which matures on June 7, 2002, and the $1.6 billion loan, which expires June 2006, are currently being renegotiated, leaving buyers and sellers uncertain as to where the paper should trade.

WorldCom said Thursday it may be hitting the market with over $5 billion in new bank loans in the near future. The Clinton, Miss. telecommunications company also said it received a waiver on its accounts receivable securitization program, tabling any debt trigger effect. Negotiations to replace the existing $2.65 billion credit facility and to expand the b $1.6 billion loan by possibly adding an additional $750 million to $1 billion onto the facility should be completed within the next 30 days, WorldCom officials said Thursday. The banks have proposed larger, secured facilities, as opposed to unsecured, short-term loans. It is anticipated that the loans would expire no earlier than 2006 and that the agreement would contain some wide covenants. Company assets would be used to secure the loan.

On Thursday, Moody's Investors Service downgraded WorldCom's senior unsecured issuer rating to Ba2 from Baa2 and Fitch Ratings downgraded the senior unsecured debt rating to BB from BBB-. On Friday, Standard & Poor's completed the company's fall to junk by lowering it to BB from BBB.

In other news, next week's primary calendar is currently extremely light, according to market sources. The lack of deals is not a big surprise, according to a market researcher, since there have been few mergers and acquisitions and most refinancings occurred last year or early this year.

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