Wireless names in the secondary loan market have nearly come full circle from distressed lows, getting help from hungry investors and, in some cases, a recovery in the credit fundamentals. Nextel Communications ticked up right under par last week. Centennial Communications, Western Wireless Corp. and Rural Cellular Corp. have also been trading in the low 90s, rebounding from lows in the 60s, 50s and high 70s, respectively, according to LoanX. With Nextel and Centennial poised to tap the high-yield markets, some think that is a sign that other wireless names will as well, said one trader.
Nextel's bank debt, for example, hit its lowest point last July, sinking down into the high 70s, according to LoanX. But the company's "B/C" tranches have been steadily climbing out of that hole, most recently inching right up underneath par with rumors that Nextel will complete a bond deal. The company's "B/C" tranches traded in the 991/2 993/4 context. The buzz initially began when the company filed a shelf registration on March 27 for up to $5 billion of new securities and Nextel officials said the shelf will give the company the ability to refinance its balance sheet at the appropriate time in a cost-effective manner. One market player suggested that Credit Suisse First Boston and Deutsche Bank would be the managers on a bond deal. A loan trader said he would not be surprised if J.P. Morgan would also participate in some capacity. A Nextel spokeswoman declined to comment on whether a bond deal was in the works.
One dealer suggested that in Nextel's case, the paper is benefiting from improved fundamentals and buyside appetite that is running up the prices for half-decent paper still trading at a discount to par. "The fundamentals are clearly there to support this paper where it's trading," he added. Even if the "B" loan was trading at par, it would still be providing investors with a LIBOR plus 31/2% return, he explained. In addition, the senior leverage is roughly about 1.5 times and the company has been repurchasing and retiring its debt and preferred stock.
Comparatively, Centennial's bank debt took a double dip last year, sliding down into the low 60s last July before inching up into the high 60s and then sliding once more last November. Earlier last week, however, the only slip seen for Centennial was from the 90 context as the company's "B/C" loan dropped briefly as low as the 86-89 context after information suggested that Welsh, Carson, Anderson & Stowe would not be providing the company with additional financing, according to market players.
But the "A" tranche ticked up to the 93-94 range and the "B" loan was bid at the 90 level later last Monday after Centennial announced that it would be pursuing a $250 million private placement note issuance. The proceeds for the offering are tagged to retire a portion of the company's existing bank debt. Thomas Fitzpatrick, Centennial's cfo, said the company's financial advisors suggested the timing was right to tap the high-yield markets. He declined to comment on the identities of the advisors and the lead book runner for the offering. He could not be reached for follow-up comment on why the Welsh, Carson was funding was not completed.
