Nextel bonds jump as Sprint deal seen near; CasaBlanca, Douglas, Simmons price deals

By Paul Deckelman and Paul A. Harris

New York, Dec. 10 - Nextel Communications Inc. bonds were heard to have firmed smartly in late trading Friday as news reports indicated that the possibility Sprint Corp. might acquire the Reston, Va.-based wireless operator seemed to be moving closer to reality.

In primary market activity, new dealers continued their end-of-year efforts to clear the forward calendar, with a series of issues pricing in rapid succession: CasaBlanca Resorts, Interdent Service Corp., Aventine Renewable Energy Inc. and Douglas Dynamics LLC/Douglas Dynamics Finance Co. There were also quickly shopped drive-by offerings from Riverdeep Holding plc and from Simmons Co. - as well as the news that Eyecare Centers of America had cancelled its planned $375 million offer of income units.

Nextel was the big mover in the secondary market Friday, building on the modest gains seen Thursday, after The Wall Street Journal reported that it was in merger-related talks with Kansas City, Mo.-based Sprint, which operates both the number-3 U.S. long-distance telecommunications network and the number-3 wireless net as well. The combination of Sprint with Nextel, the number-5 U.S. wireless provider, should it occur, would create a wireless giant with some 39 million customers, giving the larger Sprint that would emerge the heft to challenge industry leaders Cingular Wireless and Verizon Wireless, while putting more distance between itself and number-4 provider T-Mobile USA.

A trader saw Nextel's bonds up about 1½ points on the session, with the company's 5.95% notes due 2014 at 106 bid, 106.5 offered, up from Tuesday's finish around 104.5.

At another desk, those 5.95s were being pegged a little lower than those levels, finishing the day at 105, still up 1 3/8 points on the session.

An observer there quoted Nextel's 6 7/8% notes due 2013 at 110.75, up 1¾ points, while its 7 3/8% notes due 2015 were up 1¼ points at 112. He saw Nextel's 9½% notes due 2011 at 114.25 bid, up a more modest half a point.

Nextel's Nasdaq-traded shares fell a nickel (0.17%) to $29.76 in regulation trading hours on very heavy volume of nearly 59 million shares, more than six times the norm. However, in after-hours dealings, they rose 31 cents (1.04%) to $30.07.

The first trader explained that just around the 4 p.m. ET stock market closing time, "CNBC was out with news" that included the likely price that Sprint was expected to pay - 1.3 shares of its own New York Stock Exchange-traded shares, plus some cash, for each Nextel share, giving the overall transaction an estimated pricetag of $36 billion.

After that, he said, "right away, the [Nextel] bonds reacted," moving out to their point-plus gains. During the morning, for instance, the 7 3/8s had only been seen up around a quarter point in the 111 area.

"Yesterday [Thursday], you had the article in the Journal," he said, "then today [Friday], especially on the CNBC report" and other similar reports late in the day by competing news outlets, "it seemed like people took it a lot more seriously," fueling the bonds' rise.

"It seemed [Friday] like much more of a possibility, while [Thursday], it was more speculation" - especially because the idea that Sprint might combine with Nextel had been kicking around the financial world for some time. Observers noted that Nextel is the only national wireless service not currently affiliated with a larger wireline phone company like Cingular's owners, SBC Communications and Bell South, or Verizon, or Sprint, or T-Mobile's Corporate parent, Deutsche Telekom AG.

The conventional wisdom is that such a stand-alone company would look to link up with a deep-pocketed parent who could help it acquire more spectrum space, as Nextel tries to hold its own against its larger rivals - especially now that other wireless operators like Verizon are introducing or have already introduced their own version of Nextel's walkie-talkie-like push-to-talk feature. That convenient way of instantly connecting with others on your own network had been perhaps the key differentiator between Nextel and the others, winning it lots of lucrative business customers and helping it survive and even thrive against its larger rivals.

As of press time late Friday, neither Nextel nor Sprint had officially confirmed that they were even in talks, let alone confirming the reported terms of the planned agreement, which would also see Sprint chief executive officer Gary Forsee become the CEO of the merged company - which would be called Sprint-Nextel - while Forsee's opposite number at Nextel, Timothy Donahue, would serve as chairman.

Assuming the speculation is all correct, such a deal would still face hurdles. Antitrust concerns are not likely to surface, since even if Sprint and Nextel combine, their total subscriber base would still lag Cingular, which has about 47 million subscribers, and Verizon Wireless, which has 42 million.

However, integrating the two company's operations might be difficult, since they use different, non-compatible wireless platforms.

And another fly in the ointment might be the report in Friday's New York Times that Verizon Wireless, looking to head off a Sprint-Nextel combination that could challenge its position within the wireless industry food chain, might make its own offer to buy Sprint.

All that having been said, however, the trader reiterated that [Thursday] it was all pretty much speculation" - but on Friday, a Sprint-Nextel combo seemed "more definite."

MCI eases

Elsewhere, fellow telecommer MCI Corp. - whose bonds had risen smartly over the prior two sessions after Standard & Poor's assigned the company a B+ credit rating, seen as a validation of its so-far successful efforts to distance itself from its insolvent past, when it was WorldCom Inc. - were seen a bit easier Friday. The Ashburn, Va.-based number-2 U.S. long distance carrier's 5.908% notes due 2007 were quoted down half a point at 102.75, its 6.688% notes due 2009 were at 104.5, up a quarter, while its 7.735% notes due 2014 finished at 108, down ¼ point.

Bally rises further

Bally Total Fitness Holding Corp., whose bonds had performed strongly for two prior sessions on the news that the Chicago-based fitness club operator had obtained a limited waiver from a majority of noteholders to avoid a possible default, causing S&P to then raise its ratings to B- , was again up on Friday.

A market source quoted those 9 7/8% notes due 2007 at better than 85, about two points up on the day, while its 10½% notes due 2011 were up 1¾ points to 98.5

And Levi Strauss & Co. "was up a little, especially in the long end," a trader said. The San Francisco-based apparel company's 12¼% notes due 2012 were being quoted about a point higher that Thursday's close, finishing at 111.75. However, its 7% notes due 2006 and 11 5/8% notes due 2008 were pretty much unchanged, at around 103.75 bid and 105.5 bid, respectively.

Another $905 million of deals

The primary market priced $905 million proceeds in seven high-yield tranches during the final session of the Dec. 6 week, bringing the total for the five-day period to $5.162 billion.

The session nudged the year-to-date total to $135.23 billion, according to Prospect News data, as issuance draws ever closer to 2003's $138.5 billion mark.

And not withstanding Thursday's news that Intelsat Group will be holding off until the new year to sell its $2.5 billion-plus of bonds, the forward calendar still contains in excess of $5 billion of business expected to price before the end of the year.

Douglas Dynamics plows through talk

Of Friday's transactions, the preponderance came either in the middle of price talk, at the wide end or wide of talk.

The most notable of the two exceptions to the rule was Milwaukee snow plow-maker Douglas Dynamics LLC which priced $150 million of eight-year senior notes (B3/B-) at par to yield 7¾% - 1/8% inside of the 8% area price talk.

Credit Suisse First Boston had the books for the debt refinancing and dividend funding deal.

Diane Keefe, portfolio manager of the Pax World High Yield Fund - who disclosed to Prospect News on Thursday that she liked the company at the 8% area talk - declined to carp about the 7¾% print when contacted after the Friday deal had been done.

"I certainly didn't get as many bonds as I wanted," she said, adding that the Douglas Dynamics' new 7¾% notes had already traded to 102.25 bid in the secondary market, which she calculated to represent a 7¼% yield.

In trading, Douglas Dynamics' notes were seen up two points from their par issue price at 102.

CasaBlanca tight to talk

Douglas Dynamics was alone among Friday's transactions at pricing inside of talk. However CasaBlanca Resorts, which priced $165 million in two tranches, saw its senior secured tranche come at the tight end of the 9% to 9¼% price talk.

Issuing as Virgin River Casino Corp. in conjunction with RBG, LLC and B&BB, Inc., the company sold $125 million of seven-year senior secured notes (B) at par to yield 9%.

The same aggregate of issuers also sold $66 million of eight-year senior subordinated discount notes (CCC+) at 60.472, with a zero coupon for the first five years, and yielding 12¾%, right in the middle of price talk. The discount notes sale generated $39.91 million of proceeds.

Jefferies & Co. ran the books for the Mesquite, Nev.-based owner and operator of lodging and entertainment properties.

Also pulling the covers off of a discount notes deal on Friday was Atlanta mattress-maker Simmons Co., which drove by with a $269 million, face, issue of 10-year senior discount notes (Caa2/B-) that priced at 61.391 to yield 10.21%, wide of the 10% area price talk.

The sale, led by Deutsche Bank Securities and Goldman Sachs & Co., generated $165.14 million of proceeds

Simmons will use the proceeds to fund a dividend.

Portfolio manager Keefe wasn't exactly bouncing up and down on her mattress over the Simmons drive by - especially seeing as how the proceeds were slated to go under the mattresses of the equity sponsors.

"They're taking the total leverage up to 7.4 times," she said. "I own the floating-rate bank debt, and I just don't like it when they do this."

HudBay downsizes, wide end of talk

Also on Friday, HudBay Mining & Smelting Inc. priced a downsized $175 million issue of seven-year senior secured notes (B3/B) at par to yield 9 5/8%, at the wide end of the 9½% area price talk.

Credit Suisse First Boston ran the books for the acquisition deal from the Winnipeg, Manitoba-based zinc mining company.

And El Segundo, Calif.-based InterDent Service Corp. came at the wide end of talk.

The dental administrative services company, which extracted $80 million from the accounts with its sale of seven-year senior secured notes (B3/B), priced its bonds at par to yield 10¾%.

Price talk on the Jefferies-led deal was 10½% to 10¾%.

Aventine, Riverdeep on top of talk

Aventine Renewable Energy Holdings, Inc. sold $160 million of seven-year senior secured floating-rate notes (B3/CCC+) at par on Friday to yield three-month Libor plus 600 basis points, exactly in the middle of the three-month Libor plus 587.5 to 612.5 basis points price talk.

Morgan Stanley and JP Morgan ran the books for the expansion-funding deal from the Pekin, Ill.-based producer and marketer of ethanol.

And driving by on Friday from Europe was Dublin, Ireland-based computer and internet technology services provider Riverdeep Group, Ltd., which priced a €75 million add-on to its 9¼% senior notes due April 15, 2011 (B3/B-) at 106.50, resulting in a 7.735% yield to worst.

The Credit Suisse First Boston-led deal came in the middle of the 106.50 area price talk.

As the new notes bear an interest rate in excess of 1.5% lower than the original print, which came on a €225 million issue that priced at par in March 2004.

Global Crossing to hit the road

One roadshow start was heard during the Friday session.

Global Crossing (UK) Finance plc will start a roadshow Monday for its $350 million equivalent offering of 10-year non-call-four senior secured notes (Caa1/B-) which it plans to issue in dollar and sterling denominations.

Goldman Sachs & Co. has the books for the offering that is expected to price early in the week of Dec. 20.

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