Nextel Communications' bank debt has been ticking up since the company filed a shelf registration on March 27 for up to $5 billion in new securities. Market players speculate that the digital mobile phone operator could be one of the seasoned issuers poised to tap the capital markets for new financing. The company's "B" piece was quoted in the 96 96 1/2 context prior to the shelf registration and was trading in the 97 1/8 98 1/4 range last week, buoyed partly by Nextel's strong quarterly earnings report.
Market players said they believe that in addition to Nextel's filing of the shelf registration, the ripe high-yield market is encouraging the company to be opportunistic. The cost of financing for Nextel is the lowest it has ever been, said one buysider, suggesting that the company could issue bonds bearing a coupon of below 8%. Nextel is still a capital intensive company that has experienced too much stress not to take advantage of the markets when it can, he added. During the company's conference call last week, Paul Saleh, Nextel's cfo, made a vague comment about the company's intentions to tap the capital markets. "Nearly all of our capital structure becomes callable in the next two years. This shelf will provide Nextel with the means to refinance our balance sheet at the appropriate time and in the most cost-effective manner," he said.
One deal that may not be on the agenda, however, is a new bank deal. One trader, offering a contrarian point-of-view, questioned whether the company could get a bank deal with LIBOR spreads cheaper than that on its current deal. The "A" loan is priced at LIBOR plus 11/4% and the "B" tranche is priced at LIBOR plus 31/2%. "Does anyone really believe a wireless company would get less than 350 [basis points]," he noted. The company has $4.52 billion in bank debt outstanding. Calls to company officials were not returned.