Levels for Nextel Communications' bank debt fell two points after the company issued disappointing first quarter earnings, citing slowing business. The paper went to 98.50 on the "B/C" tracnhes and to 97 3/8 on the "D" paper, dealers said. "It was a pretty big surprise," said a trader. "They've performed well and are a stable credit." Yet Nextel is expected to ride out the rough spot. "All the dealers make their markets in Nextel," one observer pointed out. Another trader said the company is simply falling prey to a weakening sector. "Nextel is not the problem; it's across the board. At the end of the day it's as rock solid a credit as you can get," he said.
In the investor conference held in New York City last week, Timothy Donahue, ceo, said that operating cash flow is 15% lower than fourth quarter results. Nextel, based in Reston, Va., is a provider of wireless communications services. A company spokesman did not return calls for comment.
Nextel Partners, a subsidiary of Nextel Communications, last week pulled a $600 million credit that was to be used to pay down the existing bank debt (LMW, 3/19). The company pulled the deal because of pricing. "Investors were balking and wanted more spread, and the company wasn't willing to pay more," said a dealer, noting the failed deal will likely impact levels for Nextel's existing bank debt. "Overall negative sentiment about the deal getting pulled is going to impact it."
The company has a $5 billion deal which breaks down into four tranches and expires in 2008. Bank of Nova Scotia, J.P. Morgan Chase, Barclays Capital and TD Securities lead the deal, according to Capital DATA Loanware. Spokesmen at Barclays, J.P. Morgan Chase, and Bank of Nova Scotia declined to comment. A spokesman at TD Securities did not return calls. The deal is priced at 33/8 % over LIBOR.