Nextel Communications' bank debt slipped last week after a negative equity report from J.P. Morgan claimed that the company did not correctly account for its bad debt expense and its customer churn rate. The market for the bank debt fell from the 86 level to the 84 1/2 - 85 1/2 range. In response to the report, the company issued a statement assuring investors of the integrity of its financial results and claimed that the report employed an "over-simplified model and erroneous assumptions."
The negative news was enough to offset any boost that Nextel's bank debt might have received from its announcement that it surpassed the 10 million-subscriber mark last month. One trader, however, noted that Nextel still had business plan risk and a confirmation of subscriber numbers was not likely to give the levels much of a lift. The company also reported that it expects subscriber additions to be slightly more than 475,000 for the third quarter, with excess operating cash flow surpassing that of the secondary quarter. Calls to Paul Saleh, cfo, were not returned by press time.