Nextel Communications' term loan "B" broke into the 90s last week, with trades taking place at 91 and 90. "If the bonds keep rallying, then there is no reason for the bank debt not to get stronger," one trader said, explaining that the company had been retiring $2.6 billion in debt by swapping the bonds for equity. And a Nextel spokeswoman noted that more retirement of debt is possible. "What our ceo and cfo have said publicly is that, just as we acquired investments opportunistically, we will also retire debt opportunistically," she said.
Nextel's term loan "B" was last seen trading in the 90s in late January, according to LoanX. The paper started slipping as the telecom crisis took out some of the industry's largest players, and it dipped into the high 70s in late June after WorldCom's accounting scandal shook up investors and caused a reevaluation of companies that rely on over-leveraged business models. "People are now buying into the fact that the company is fundamentally sound," a dealer said.
In addition, pieces of the company's "A" term loan moved at the 88 level, and the term loan "D" traded in the 87 3/4 context early last week. Market players are starting to look at the "A" piece as a yield-to-call play rather than a yield-to-maturity play, one dealer commented, citing the tranche's healthy amortization schedule. The spokeswoman declined to comment on the trades.