Bankers last week were saying agents on Nextel Partners' $600 million credit would likely have to increase pricing, but the company says it will pull the deal from the market if presented with an increase. At press time last Friday no new pricing structure had been arranged, but some bankers said one was needed to compete with other telecom deals and mollify lenders concerned that Nextel's parent, Nextel Communications, reported last week that it is expecting first quarter results to be hurt by the slowing economy. ButAlice Kang, director of investor relations at Nextel Partners, said if banks pressure the company on the pricing front the company will not do the deal. "When we negoitated the terms we were firm on pricing and if we can't seem to get the facility done at the current price, then we won't do it at all," she said.
As Kang explained in a story first reported on LMW's Web site last week, the new facility was launched with the objective of paying down the company's existing bank debt. If pricing is too high the company will merely ride out the terms of the existing loan. "We don't need the money today, so there's no rush," she said. Kang and a banker on the deal said that banks have committed. Both declined to name banks.
In response to the parent company's announcement about first quarter earnings last week, the market saw the company's bank debt, bonds and stock take a hit as the news hit the street. "The stock's down 30% and the bonds are trading four points off and bank debt below par," said one trader on the day of the company's announcement. A banker on the deal dismissed speculation about pricing issues, claiming that the parent company's performance will not reflect on the Nextel Partners deal as the subsidiary hasn't shown any performance changes. "You'd just rather it didn't rain on the day you go to the beach," he said.
But market sources said investors will need more enticement especially since other strong telecom credits--such as Williams Communications, Level 3 Communications, and Fairpoint Communications -- are having their own problems making their way through syndication as buysiders are looking to other sectors to fill their portfolios.
Credit Suisse First Boston, Bank of Montreal, and TD Securities are leading the $600 million credit that will replace the existing $425 million deal. The new credit comprises a pro rata tranche priced at LIBOR plus 3 1/4% and an institutional tranche priced at LIBOR plus 3 3/4%. And what happens to fees if the company walks? "Let's put it this way, in this business fees are based on success," said the banker. Officials at those firms either declined to comment or did not return calls by press time.