Nextel's term loan "E" moved back up to the 100 5/8-100 7/8 context from the 100 1/2-100 3/4 level last week, after rumors that the company would attempt a repricing without paying call protection were discounted.
Some market participants said Nextel was planning to call its term loan "E" with a $400 million revolver. This caused a slight drop from below the 101 range the loan has been quoted all year. One trader suggested that the rumors were being floated so that the loan could be bought more cheaply. "It wouldn't be the first time a borrower will go around the call," one trader countered though. However, if Nextel waits until the call protection expires in December, then they avoid the call at 101, he noted. This is what will occur, said another trader.
The rumor of an egregious repricing started fading out toward the end of last week and Nextel's levels inched back up. But there is now a firm belief the loan will be taken out once the call protection expires. "For LIBOR 225 on an asset that has a BBB rating from [Standard & Poor's] and a Ba1 from Moody's [Investors Service] it is clearly overpriced," said a trader.
"One of the reasons it's not trading higher is because it's going to be taken out," the dealer said. If this rumor hadn't gone out, it would be trading above 101 where it was trading for almost a year, he said. Nextel has a $2.2 billion facility led by J.P. Morgan. Spokesmen from Nextel and J.P. Morgan declined comment.