Charter Sells $3.5 Billion of Bonds to Buy Comcast Assets

A unit of Charter Communications Inc. sold $3.5 billion of speculative-grade bonds to help acquire some of Comcast Corp.’s cable subscribers, more than doubling the amount it initially planned to issue.

A unit of the company sold $1.5 billion of 5.5 percent, eight-year securities and $2 billion of 5.75 percent, 10-year notes, Charter said in a statement today. The company initially planned to offer $1.5 billion.

After losing a bidding war for Time Warner Cable Inc. to Comcast, Charter agreed in April to purchase cable-TV customers from the winning suitor. Comcast is awaiting regulatory approval for its Time Warner Cable purchase.

Charter will use part of its offering proceeds to purchase cable systems serving approximately 1.5 million Time Warner Cable video customers, and will be held in escrow until the transactions between Charter and Comcast close, the company said in a separate statement. The bonds ultimately will become obligations of Charter subsidiaries CCO Holdings LLC and CCO Holdings Capital Corp., according to the statement.

The company is taking advantage of relatively low borrowing costs to fund the proposed purchases. Yields on U.S. junk bonds, which reached a record low 5.69 percent in June, have fallen 0.41 percentage point the past two weeks after reaching a more than one-year high of 6.7 percent on Oct. 15, according to the Bank of America Merrill Lynch U.S. High Yield Index.

Market Pricing

“You have a lot of different chess pieces on the board, and they’re taking advantage of any current market pricing and funding it while they can,” Bloomberg Intelligence credit analyst Erich Marriott said by telephone.

The broadband company signed a $3.5 billion term loan Sept. 12 to raise money for the Comcast transaction, according to data compiled by Bloomberg.

Charter announced third quarter financial results today, two days ahead of schedule, in connection with the bond offering, said Justin Venech, a spokesman for Charter. The company plans to hold an earnings call tomorrow.

Moody’s Investors Service graded the new bonds B1, four levels below investment grade, the ratings firm said in a statement. Standard & Poor’s assigned a B+ grade. Speculative-grade debt is rated below Baa3 by Moody’s and less than BBB- at S&P.

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