August 8, 2014 / 8:15 PM / 3 years ago

TRLPC-Charter cuts loan size, increases pricing in choppy market

NEW YORK, Aug 8 (Reuters) - Cable company Charter Communications cut the size of its term debt and made lender friendly changes on Friday, driven by choppy market conditions, sources said.

This is one of a batch of deals facing higher borrowing costs as investors balk at pricing levels due to growing volatility in the equity and high-yield markets.

The changes to the credit come on the heels of a weakened secondary market, $1.5 billion of outflows from bank loan mutual funds and a record $7.1 billion in outflows from high-yield bond funds in the latest week ending Wednesday.

“The large outflows are widening primary pricing,” said a loan investor.

The company is now seeking a $3.5 billion, seven-year term loan to back its purchase of Time Warner Cable assets from Comcast, said sources.

Formerly, the company was looking to seal $7.4 billion in term debt, split between a $3.2 billion, six-year first-lien term loan G and a $4.2 billion, seven-year first-lien term loan H.

Charter is also in market for a $1 billion, five-year term loan A-2 and a $500 million incremental 3.5-year revolving credit, which are unchanged.

Goldman Sachs, lead left on the transaction, declined to comment. Goldman is joined on the right by Bank of America Merrill Lynch, Credit Suisse and Deutsche Bank.

Loan sources predict that the rest of the credit facility will come to market after the Labor Day holiday.

Price guidance on the now smaller term loan is being increased to LIB+350 with a 75 basis point (bp) Libor floor and a 99 original issue discount (OID). Earlier in the week, whispers were for a hike to LIB+325 with a 75bp Libor floor.

The term loan G was initially guided at LIB+275-300 with a 75bp Libor floor and 99.5 original issue discount. Pricing for the term loan H was guided at LIB+275-300 with a 75bp Libor floor and a 99 OID. Call protection is being guided at 101 soft call for six months.

Structural changes are also in the works, including MFN options and ticking fees, sources said.

Formerly, ticking fees for the loans were 33 percent of margin for the first 45 days, 50 percent of margin for days 46 through 90 and 100 percent of margin 91 days or longer, sources said.

Recommitments from lenders are due Monday.

Charter’s asset purchase is tied to Comcast Corp’s $45.2 billion bid for Time Warner Cable announced in February. Comcast, in a joint statement with Charter in April, said it would divest systems serving existing Time Warner Cable customers directly to Charter for cash. (Reporting By Lisa Lee; Editing by Michelle Sierra and Lynn Adler)

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