Dole deal expected to go well; Nextel gains on earnings; Titan loses on COO news; TRW breaks

By Sara Rosenberg

New York, Feb. 20 - The managing agent bank meeting for Dole Food Co. Inc.'s $1.15 billion credit facility went well on Thursday with some participants walking away with the expectation that the syndication process should be a smooth one.

Meanwhile, in the secondary, Nextel Communications Inc. moved up on stellar 2002 and fourth quarter numbers, Titan Corp. moved down on management changes and TRW Automotive broke for trading.

Dole Food's loan is expected to be a huge success by some followers of the deal. In fact, one fund manager who participated in the top-tier managing agent bank meeting on Thursday told Prospect News that the only thing he's "scared of is if the deal goes really they might flex down to 325 or 350".

Asked why the new deal is anticipated to see an abundance of interest, the fund manager explained: "Leverage is going to be pretty low on a senior basis. On a total basis it won't be that high either. The company generates cash and tends to pay down debt quickly. And the management team has been around for a long time."

The facility consists of a $600 million 51/2-year term loan B with an interest rate of Libor plus 375 basis points, a $250 million five-year term loan A with an interest rate of Libor plus325 basis points and a $300 million five-year revolver, containing both a U.S. dollar and euro tranche, with an interest rate of Libor plus 325 basis points. "Pricing is in line with the way Del Monte got priced. It's what I expected," the fund manager said.

However, despite all the positive factors that may influence a potential investor's decision, there is one thing that sparked some concern - the collateral package.

"The one thing I would definitely need to some work on is how the collateral works since the loan is secured by a lot of foreign assets," the fund manager said. "Are we truly secured in foreign countries? If something were to go bad, would we be able to get these assets, sell them and get our money?"

DHM Acquisition Co., which is wholly owned by David H. Murdock, will use the senior secured credit facilities to help fund a buyout of Dole and refinance some of Dole's debt.

The company also plans to sell high-yield bonds to help finance the transaction. Under the acquisition agreement, Murdock is permitted to purchase approximately 76% of Dole's outstanding common stock that he and his family do not own for $33.50 per share in cash.

When this deal was first announced, one market professional noted that the question of 'why take the company public' might arise and create some concern. During the Thursday meeting it was explained that the company's shares are currently seen as undervalued by Murdock and therefore he figured he would buy the company. "It's an opportunity to buy and then some day bring it public and make a lot of money," the fund manager said.

Deutsche Bank, Scotia Capital and Bank of America are the lead banks on the deal.

The retail lenders meeting is not expected to take place until March 10.

Dole is a Westlake Village, Calif. producer and marketer of fresh fruit, fresh vegetables and fresh-cut flowers, and markets a growing line of packaged foods.

Nextel's bank debt moved up across the board after the company once again released positive financial results. The term loan A was up by about a point, trading at 90 7/8. The B and C term loans were up by about 1½ to two points at 94¾ bid, 95 1/8 offer, according to a trader.

"These guys never seem to disappoint on the earnings side," the trader added.

For 2002, income available to common stockholders was $1.66 billion or $1.88 per share. Revenue was $8.7 billion, a 24% increase over last year. Domestic EBITDA was $3.13 billion, an increase of 67% over the 2001.

For the fourth quarter, revenue was $2.33 billion and EBITDA was $886 million. Approximately 503,000 subscribers were added during the quarter, bringing total subscribers to 10.61 million at year-end. Income available to common stockholders was $1.46 billion, or $1.49 per share, including gains related to the retirement of debt and preferred stock totaling $35 million or $0.04 per share and a gain on the deconsolidation of NII Holdings of $1.2 billion or $1.24 per share.

The Reston, Va. wireless company retired approximately $3.2 billion in debt and preferred stock during 2002, including $588 million during the fourth quarter.

"2002 was a breakthrough year for Nextel as we grew revenues by 24%, fueled by strong customer demand of nearly 2 million new subscribers for Nextel's differentiated wireless services," said Tim Donahue, president and chief executive officer, in a news release. "More importantly, Nextel expanded its EBITDA by 67% to more than $3.1 billion and reduced capital expenditures by 22% to $1.86 billion. During 2002, Nextel produced positive earnings per share and positive free cash flow, ahead of schedule and for the first time in Nextel's history. We expect continued excellence in 2003 and I am confident we will have another great year."

"Nextel achieved positive free cash flow of $122 million and positive full year earnings in 2002 - ahead of schedule and in what can only be described as a challenging environment," said Paul Saleh, executive vice president and chief financial officer, in the release. "Nextel increased stockholders' equity by $3.4 billion from a deficit to more than $2.8 billion and also significantly improved its financial flexibility in 2002 by retiring $3.2 billion in debt and preferred obligations. Nextel's de-leveraging activities in 2002 will enable the company to avoid payments of approximately $5.4 billion in principal, interest and dividends over the life of these securities. Nextel plans to build on this progress in 2003 by focusing on generating in excess of $500 million free cash flow while driving for even greater capital and operating efficiencies."

Guidance given for 2003 included free cash flow of $500 million or more, earnings per share of at least 75 cents, EBITDA of $3.8 billion or more, capital expenditures of $1.8 billion or less and net subscriber additions of 1.7 million or more.

Titan's bank debt was off by about a point on Thursday following news that the company's president and chief operating officer is leaving. The paper was quoted with a 99 bid and a 99 3/8 offer, according to a trader.

"The COO is leaving. He was the front man people knew. Why is he leaving? Are there problems? Questions come up and we won't know anything for sure until the company says something definitive.

"[Also], they're scheduled to report on Tuesday. People always get nervous when a guy leaves before earnings news comes out," a trader said in regards to the drop in the bank debt levels.

Eric DeMarco, president and COO will be leaving Titan in mid-March "to pursue other interests", according to an early morning news release. Gene Ray, chairman and chief executive officer will be assuming DeMarco's duties.

During the late afternoon, the company put out a second announcement (seen as a move to allay investor concern indicated by a $3.20 decline in the stock) in which it stated that the "departure of Eric DeMarco, Titan's president and COO, which was announced earlier today, was not related to the financial performance and condition of the Titan Corporation."

The second release also stated that fourth quarter 2002 pro forma results are still expected to be consistent with the guidance previously provided in its Oct. 28, 2002 quarter conference call.

Titan is a San Diego provider of comprehensive information and communications systems solutions and services to the Department of Defense, intelligence agencies, and other federal government customers.

TRW Automotive's bank debt broke in the secondary on Thursday with the term loan A trading in the low 99's and the term loan B trading at par 1/2, according to a trader.

The $1.81 billion credit facility consists of $500 million six-year revolver with an interest rate of Libor plus 350 basis points, a $410 million six-year term loan A with an interest rate of Libor plus 350 basis points and a $900 million eight-year term loan B with an interest rate of Libor plus 400 basis points.

Credit Suisse First Boston, JPMorgan, Deutsche Bank, Lehman Brothers and Bank of America are the lead banks on the deal that will be used to fund the acquisition of TRW by The Blackstone Group from Northrop Grumman Corp.

TRW Automotive is a Livonia, Mich. diversified supplier of automotive systems, modules and components.

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