Bonds backing Charter Communications popped this morning, buoyed by reports of a potential mobile phone partnership with SpaceX as well as the revelation that rival Comcast Corp. plans to split into two publicly traded companies.
Charter stock surged after Bloomberg reported that the company is in discussions to route some phone traffic through SpaceX’s direct-to-cell service, which SpaceX already operates in partnership with T-Mobile. This would enable Charter to pivot from its massive and costly wireless infrastructure buildout to leveraging SpaceX’s satellite-to-device infrastructure and mobile spectrum. Conversely, it would allow SpaceX to accelerate its Starlink Mobile ambitions by tapping into Charter’s massive distribution network and billing operations.
Meanwhile, Comcast’s news is fueling speculation around a potential Charter/Comcast merger that could generate massive operational cost savings for Charter, while stabilizing revenue as the debt-laden company struggles to gain market share in a competitive landscape. The company carries roughly $96 billion in long-term debt.
While sources note that short-covering likely inflated stock and bond moves (heavy debt makes Charter one of the most heavily shorted stocks in the S&P 500), the latest developments clearly lifted sentiment. Active Charter issues started the session roughly four points higher. The busiest of the stack was the $1.25 billion print of 7.375% senior notes due 2036, which was up 3.75 points at 99.75, for a yield of around 7.40%, trade data show. The borrower’s $1.75 billion of 7% senior 2033 notes jumped 4.125 points to a 99.75 context and a 7.04% yield, while remaining well below late-April highs with a 102 handle.
Charter is a rising-star candidate with BB+/Ba2/BB+ corporate ratings, stable outlooks at S&P and Moody’s, and an upgrade review underway at Fitch on its imminent merger with higher-rated Cox Communications. Comcast is rated A-/A3/A-.
Meanwhile, SpaceX’s $25 billion of debut bonds (BBB/Baa1/BBB+), which settled uneasily on the aftermarket, also reflected investor optimism around the news. The biggest tranche ($7 billion of 5.35% 2031 bonds) traded in blocks at T+115 today, or five basis points wide of pricing. Trades were at T+156 for the 5.875% 2036 notes (priced T+145) and at T+197 for the 6.65% 2056 bonds, the latter 22 bps wide of pricing. At the wides last week, the 2056 bonds hit T+203, per MarketAxess.
That’s as Barclays notes that “spreads are starting to reflect the supply shock.” Hyperscalers, in particular, have underperformed the IG index by about 50 bps since the middle of last year, even when excluding lower-rated Oracle from the cohort, per Barclays. It added that underperformance “is particularly pronounced in the very long end.”
Away from SpaceX, Oracle’s 6.70% 2056 bonds traded at T+220-225 today, from T+200 as recently as June 15. Oracle priced the notes in February at T+180, after it priced a comparable 5.95% 2055 issue last September at T+125. Meta’s 6.30% 2056 bonds traded today in the high T+130s, from all-time highs last week in the low T+140s. It inked the notes on April 30, at T+132, and they started June at T+120.
Comcast bondholders were less positive, with the borrower’s vast stack slipping lower this morning. Its long bonds took the biggest hit, with the $1.4 billion of 5.5% senior 2064 notes shedding 0.75 points to trade at 86.875 (T+157). Those bounced from an 85 to an 89 handle at the end of May and have remained rangebound in an 87 context since June 3. Comcast’s landmark plan will see it spin off NBCUniversal and Sky from its core broadband and cable operations.
Beaten-down Cable One bonds were also coiled for an outsized move as the Comcast news stirred the general consolidation narrative in the sector. The borrower’s 4% senior 2030 bonds were up 5.25 points on the highs, at 56.5, for a yield of around 19.1%. Those hit an all-time low at 51 last week while the company moved to restructure its debt amid slumping subscriber numbers and a slide in average revenue per user (ARPU).
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