Bloomberg News

Time Warner Cable Bonds Jump on Comcast; Credit Swaps Decline

February 13, 2014

Bonds of Time Warner Cable Inc. (TWC:US) soared to about the highest levels in nine months after Comcast Corp. (CMCSA:US) agreed to buy the media provider for $45.2 billion, combining the two largest U.S. cable companies. An index of corporate credit risk declined.

Time Warner Cable’s $1.25 billion of 4.5 percent notes due 2042 surged as much as 15.5 cents to 90.7 cents on the dollar today, the highest since May, before trading at 90.4 cents to yield 5.15 percent at 4:01 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Bondholders pushed the price higher after the announcement of the deal, which follows a rejected acquisition offer for Time Warner Cable of $132.50 a share from Charter Communications Inc. and its billionaire backer John Malone. The Comcast bid valued Time Warner Cable shares at $158.82 each.

“Comcast has a very well funded balance sheet that makes Time Warner Cable’s credit improve, whereas Charter would have made it deteriorate,” Scott Kimball, a fixed-income manager at Taplin Canida & Habacht LLC, a BMO Financial Group unit that oversees $8 billion and owns Time Warner Cable bonds, said in a telephone interview.

Charter, the fourth-largest U.S. cable company, would have added $25 billion more debt as part of its offer.

Charter Bonds

Charter’s $1.5 billion of 6.5 percent notes due 2021 jumped as much as 1.7 cents to 106.3 cents on the dollar, the biggest increase since Nov. 25, according to Trace.

The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark used to hedge against losses or to speculate on creditworthiness, declined 0.6 basis point to 64.7 basis points, according to prices compiled by Bloomberg. The gauge is poised to close at the lowest level in four weeks.

The credit swaps measure typically falls as investor confidence improves and rises as it deteriorates. The contracts pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

Diamond Foods Inc. (DMND:US) issued $230 million of 7 percent, five-year securities to yield 542 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. The debt is rated Caa2 by Moody’s Investors Service, the data show.

The unprofitable producer of Pop Secret microwave popcorn and Kettle Brand potato chips cut the rate on a $415 million loan it’s seeking to refinance debt, according to a person with knowledge of the transaction.

The risk premium on the Markit CDX North American High Yield Index, tied to the debt of 100 speculative-grade companies, narrowed 2.3 basis points to 321.2, Bloomberg prices show. High-yield, high-risk bonds are rated below Baa3 by Moody’s and less than BBB- at Standard & Poor’s. A basis point is 0.01 percentage point.

The extra yield investors demand to hold investment-grade corporate bonds rather than government debt was little changed at 110.7, Bloomberg data show.

To contact the reporter on this story: Jessica Summers in New York at jsummers20@bloomberg.net

To contact the editor responsible for this story: Shannon D. Harrington at sharrington6@bloomberg.net


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Companies Mentioned

  • TWC
    (Time Warner Cable Inc)
    • $146.45 USD
    • -1.07
    • -0.73%
  • CMCSA
    (Comcast Corp)
    • $54.18 USD
    • -0.26
    • -0.48%
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