The recent rally in the bonds of Nextel Communications has prompted high-yield market participants to say that the wireless company is in a position to access the debt markets to refinance some of its high-coupon preferred securities.
A West Coast portfolio manager says "the company is basically delivering and in some cases beating their targets. At some point they may attempt to refinance." With some $6 billion in high-yield bonds outstanding, Nextel is one of the largest high-yield issuers that is not a fallen angel.
After a better-than-expected fourth quarter earnings performance, the benchmark 9.375% notes of '09 climbed briefly above par, and traded at 99 last Monday morning. The bonds were in the 50s last July and have made steady gains ever since.
Nextel has some high-cost debt, notes Romeo Reyes, analyst at Jefferies & Co. He points to two high-coupon preferred issues totaling some $1 billion: the 13% of '09 and the 11.125% preferred notes of '10. Both issues have gone cash pay, and the company could probably issue debt at close to 9.5%, Reyes argues. However, he notes that Nextel has $2.7 billion in cash, and has said publicly that it has no plans to access the capital markets. "That's not to say things couldn't change in the next three to five months," he says. A call to Paul Saleh, Nextel CFO, was not returned.