The game of guessing where the bottom is for the telecom sector is cramping the style of some staple names in the secondary market. Players who are hedging their bets on where the paper will level out are trading old standbys such as Nextel Communications, which traded in the 98 1/2 to 98 3/4 range last week. McCleod USA, once trading above par, traded in the 99 range. A $5 million piece of SpectraSite Communications' bank debt traded at 97 7/8.
Dealer said there is no end in sight for the industries woes. "Telecom has absolutely no buyers. It's difficult for me to even find buyers of top tier telecom names like Nextel," a dealer observed last week. "Look at the carnage in the high-yield market as a result of disappointing results and outlook. Plus the technicals are very weak as accounts are full to the gills in telecom. I think we're in store for more downside and it could be significant. This market feels worse than [it did] in the fall of 1997."
Another dealer said that buyers consider telecom names too much of a risk right now. "The problem with telecom is no one knows where the 'bottom' is, so it's been tough to buy on the low tick," said a trader.
Nextel Communications has a $5 billion deal that breaks down into four tranches. Bank of Nova Scotia, J.P. Morgan Chase, Barclays Capital, and TD Securities are the lead arrangers, according to Capital DATA Loanware. SpectraSite has a $500 million deal that breaks down into three tranches. CIBC World Markets and Credit Suisse First Boston lead the deal.