Nextel firms up on positive Q2; Tyco dips on investor uncertainty

By Sara Rosenberg

New York, July 16 - Secondary activity picked up a bit on Tuesday with Nextel Communications Inc.'s bank loan paper strengthening by about two points on positive second quarter results and Tyco International Ltd.'s long-term bank debt weakening by approximately one point possibly due to SEC investigation worries.

"Nextel B, C [loans] traded up as high as 86 on news that they were cash flow positive," a trader said. "And then it settled back down to [a bid of] 83 [and an offer of] 84." On Monday, the company's bank loan traded at around 81.

The Reston, Va. mobile communications provider announced financial results for the second quarter of 2002 early Tuesday, which included a first-time achievement of positive net income. Domestic revenues increased 25% to approximately $2.2 billion and domestic operating cash flow increased 69% to $816 million over the comparable period in 2001, according to a company press release. Domestic capital expenditures were $448 million in the second quarter of 2002, a decrease of 27% from the $616 million in the second quarter of 2001. Furthermore, Nextel retired about $1.1 billion in debt and preferred stock during the second quarter and has entered into agreement to repurchase a further $400 million in debt.

"We're growing market share, attracting high value subscribers and exceeding all expectations for incremental cash flow," said Tim Donahue, president and chief executive officer, in a press release. "This great progress gave us the confidence to prudently invest our cash and opportunistically reduce our indebtedness and preferred securities by $1.5 billion in face amount. This significant reduction will save Nextel about $2.5 billion over the next nine years in foregone interest, principal and dividends. The combination of accelerated cash flow, reduced expenditures and the gain from our significant debt reduction activities generated our first-ever positive quarterly net income."

Tyco's short-term debt remained flat with a bid of 92 and an offer of 93, a trader said. The long-term debt, however, dropped slightly to a bid of 81 and an offer of 83 on Tuesday from a bid of 82 and an offer of 84 on Monday, the trader added.

The Pembroke, Bermuda manufacturing and service company was dropped from Goldman Sachs' list of recommended stocks Tuesday due to concerns over scrutiny by the Securities and Exchange Commission.

This week's primary activity kicked off with the launch of Jostens Inc.'s $330 million six-year term loan C, according to a syndicate source. JP Morgan Chase and Deutsche Bank are joint lead arrangers on the deal.

The tranche C will be used to replace the company's existing term loan B that has an interest rate of Libor plus 350 basis points. The new term C is expected to "be tighter" than the term B, the syndicate source added. Security for the term loan C is basically all assets, the syndicate source said.

Jostens, an Investcorp portfolio company, is a Minneapolis, Minn. producer of yearbooks and class rings.

The syndicate was not immediately available to comment on the deal.

In other news, The Houston Exploration Co. closed on a new $300 million three-year unsecured revolving credit facility. Wachovia Bank is the administrative agent, Bank of Nova Scotia and Fleet National Bank are co-syndication agents and BNP Paribas is documentation agent.

The interest rate on the loan is tied to the amount of borrowings under the revolver. Currently, the company has drawn somewhere between 66% and 90% and has an interest rate of Libor plus 150 basis points on the loan, a company spokesman said.

Proceeds will be used to refinance the Houston, Tex. natural gas and oil company's existing $250 million credit facility that was scheduled to mature in April 2003, for ongoing working capital and for general corporate purposes.

Community Health Systems Inc. closed on its new $1.2 billion senior secured credit facility (BB-/BB) that consists of an $850 million term loan due 2010 and a $350 million six-year revolver. The facility also has a feature that allows for $200 million of future funded term loans, according to a company press release.

JP Morgan Chase Bank was administrative agent, Bank of America was syndication agent, Wachovia First Union was documentation agent and JP Morgan Securities Inc. and Banc of America Securities LLC were joint arrangers and co-managers for the loan.

The Brentwood, Tenn. provider of general hospital healthcare services is using proceeds from the loan to refinance existing debt and fund current acquisitions.

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