Many bankers were speculating on whether Deutsche Bank will be able to pull off its $400 million deal for FairPoint Communications as Nextel Partners announced it will not move forward with its $600 million add-on deal in light of what it sees as unfavorable pricing in an unfriendly telecom market. And as bankers see it, Fairpoint may suffer a similar fate. Officials at FairPoint did not return calls.
Nextel's deal was a refinancing so the company said it would stick with its original deal rather than incur a pricing hike. "The market was looking for a higher spread over LIBOR than we were willing to pay," said Alice Kang, director of investor relations at Nextel, explaining that the company will postpone until market conditions for telecom deals improve. FairPoint's a little more pressured, but not much. One banker said FairPoint was planning to use the facility to make acquisitions and the absence of the funds reduces its capacity as the company's other revolvers are almost fully drawn. But he noted that Nextel's departure from the loaded up telecom field may make a little more room for the deal.
Last week, Deutsche raised pricing on the institutional tranches of FairPoint by 50 basis points to entice investors but market sources said only a few commitments have come in with the biggest at $25 million. Bankers said the deadline for the deal is this week and some commitments are expected to be as small as $4 million. Deutsche Bank officials declined to comment.