Fidelity Investments reportedly has been an active buyer of McLeodUSA's $575 million "B" loan. Market participants are split on what the fund's underlying motives are. One trader said Fidelity has already started building a position in the telecommunications service provider's debt. But another market player disagreed. "Fidelity is not in the business of running companies, they are buying the debt anticipating price appreciation," he said. Spokesmen for McLeod and Fidelity did not return calls.
In the past three weeks, McLeod's term loan has been quoted by market participants within the 55-60 context. Last month McLeod reported a net loss of $91.4 million and declining revenues of $193 million for the first quarter of 2004. Prior to this, the bank debt was trading up to 15 points higher (LMW, 5/24).
McCleod also has a $110 million revolver led by J.P. Morgan, Bank of America and Citibank. The company recently obtained amendments to the credit including changes to the minimum revenue, leverage ratio and interest covenants. The lender group was paid $1.9 million in connection with the amendment. Fortsmann Little & Co. is McLeod's principal shareholder.