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Charter Communications Launches $3.5B Bank Loan Backing Time Warner Deal

An arranger group led by Bank of America Merrill Lynch today launched a $3.5 billion H term loan for Charter Communications, setting price talk of L+275-300, with a 0.75% LIBOR floor, and a 99.5 offer price, according to sources. Lenders to the seven-year loan are offered six months of 101 soft call protection.

At the proposed guidance, the loan offers a yield to maturity of about 3.63-3.89% to maturity. A lender call is scheduled for 11:30 a.m. EDT today; commitments are due by 5 p.m. EDT on Wednesday, July 22.

BAML, Goldman Sachs, Credit Suisse, Deutsche Bank, and UBS are arranging the transaction. 

The $3.5 billion institutional loan is part of a broader debt financing package as the Nasdaq-listed cable operator seeks funds to complete its $78.7 billion purchase of Time Warner Cable and its $10.4 billion purchase of Bright House Networks. Recall the company earlier this month placed a $15.5 billion, six-part bond deal that drew BBB-/Ba1/BBB- ratings and was placed with both high-grade and high-yield accounts, while the company has also approached the pro rata market for a portion of the debt financing. 

Note the loan will fund into escrow 30 days after allocations, at which time lenders will receive the full spread and LIBOR floor. At the time the deal was announced in late May, Charter said the M&A transactions are expected to closer by the end of 2015.

Issuance will technically come at CCO Safari III. Once the loan is released from escrow, it will be assumed by Charter Communications Operating.

The loan will be governed by a secured-net-leverage test of 4x and a total-net-leverage test of 5x at the CCO entity, sources added.

Pro forma for the acquisitions, the deal is expected to draw BB+/Ba2/BB+ corporate ratings and BBB/Ba1/BBB- facility ratings, with a 1 recovery rating from S&P.

The combination of Charter, Time Warner Cable, and Bright House Networks will create a broadband services and technology company serving 23.9 million customers in 41 states, according to the firm. – Kerry Kantin

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