Lower new issue volume in the primary market is helping propel stalwarts such as Nextel Communications and other telecommunications credits that not long ago were kept at arms' length because of overexposure. "It's going to start popping up with continued lack of good new issues," said one trader. "People need to keep cash at work, and [Nextel] is an oldie but goodie. There's sort of a risk/reward to diversifying your portfolio, but if you go too far you can blasted by a bad deal."
Dealers reported a number of $5 million trades of the credit's term loan "D" at 99.375 at the "B/C" at 99 1/4 and on Wednesday a dealer said the paper was quoted at 100 1/2. The Reston, Va.-based company is a provider for wireless phones, two-way radio dispatch and paging services. A company spokesman declined to comment.
As loan default rates have gone up and banks have tightened the strings on lending, fewer primary deals with any juice are hitting the market, traders noted. Players are now turning to other tried and true industries-some of which were out of favor not long ago-to fill the void. "We're seeing that in spades," he said. "Do you want something where you understand the credit and know there's a reasonable return, or do you want commercial paper? There are definitely the top 15 to 20 names right now getting the attention. Everybody's a buyer and nobody's a seller." He mentioned industries like hospitality, telecommunications, and gaming as some of the most attractive. Another dealer agreed, adding cable, broadcasting, and even health care to the list. A $25 million piece of Integrated Health Services' bank debt traded up to the mid-38 to 39 range last week. "Companies like 360 Networks are doing well," a dealer said. "The long haul broadband providers are seeing good demand for their product."
Earlier this month the "D" tranche of Nextel was quoted at 99 1/2, and the "B/C" was at 100 1/4 (LMW, 2/4). Dealers attributed the slight dip to a bond deal going slowly and resulting in the dumping off paper. The $5 billion credit breaks down into four tranches. It matures in 2008. Bank of Nova Scotia, J.P. Morgan Chase, Barclays Capital, and TD Securities are the lead arrangers, according to Capital DATA Loanware.