Nextel revolver size raises eyebrows as some wonder what how the excess liquidity will be used

By Sara Rosenberg

New York, June 23 - The humongous size of Nextel Communications Inc.'s proposed $4 billion revolver has some investors wondering why the free cash flow generating machine needs so much liquidity. As people mulled this over, a number of speculations started to fly, including acquisitions, government settlements and additional paydowns.

Proceeds from the new revolver will be used to replace the company's existing revolver and term loan A, but, according to a market source, the previous revolver was much smaller and even if all the term loan A debt is paid down using the new revolver there's still a lot of room left over.

"Why is a company that generates so much free cash flow, hundreds of millions of dollars of free cash flow, need a $4 billion revolver?" the market source said. "I think they've got something in mind, I just don't know what it is.

"There's speculation that they might buy Nextel Partners. That has a $4 billion equity value," the source said.

"[Or], maybe this transaction reflects the belief that they've settled with the government and want to set up a credit facility that can fund what they need." Nextel currently has a proposal to swap some spectrum with the public safety sector in order to address interference-related issues, and has offered to provide the sector with up to $850 million in assistance over several years. This proposal is still under FCC review and is being challenged by several competitors.

"They are in discussions with the government about swapping spectrum and have recently said that good progress has been made on the discussions. Maybe they need to show the government, hey we got the revolver, we can do it - make the payment and then pay it down or go sell some bonds to refinance it. [This theory] makes a lot more sense [than the Nextel Partners acquisition]. It's the most potentially timely," the source concluded.

Other speculation includes that a portion of the new revolver will not only go toward refinancing the existing revolver and term loan A but will also be used to pay down a portion of the term loan E based on secondary performance.

The term loan E was quoted at par ¾ bid, off by about an eighth of a point on the day, a trader said.

"Some people are worried that they might pay down some of the E with proceeds," the trader added.

Nextel is scheduled to hold a bank meeting on Monday for the proposed $4 billion revolver. JPMorgan and Citigroup are the lead banks on the deal, with JPMorgan listed on the left.

As of March 31, the Reston, Va., wireless company's credit facility provided for total secured financing capacity of up to $4.915 billion, consisting of a $1.275 billion revolver, of which $116 million has been borrowed and $26 million has been committed under letters of credit, and $3.64 billion in two classes of term loans, a term loan A and an approximately $2.2 billion term loan E, according to a form 10-Q previously filed with the Securities and Exchange Commission.

Beginning April 1, the amount of the revolving loan commitment was scheduled to be reduced by $75 million every quarter continuing through March 31, 2005, at which time the quarterly reductions are supposed to increase to $93.75 million continuing through March 31, 2007. Starting April 1, 2007, the quarterly reductions decrease to $75 million.

Belden sees early orders

Belden & Blake Corp.'s proposed $170 million credit facility has already received early orders for more then half of the deal even though the bank meeting hasn't even taken place yet, according to a market source.

Goldman Sachs is the sole lead bank on the deal, which is set to launch via a bank meeting on Friday.

"People like the 1½ times leverage on a first-lien basis," the source explained.

The facility consists of a $30 million revolver, a $40 million letter-of-credit facility and a $100 million term loan, the source said. Price talk on the tranches is not yet being released.

Proceeds, combined with proceeds from a $150 to $200 million bond deal, will be used to help fund Belden's merger with an affiliate of Carlyle/Riverstone Global Energy & Power Fund II LP.

Carlyle/Riverstone, through its new partnership with Capital C Energy LLC, entered into a cash merger agreement to acquire all of the outstanding stock of Belden & Blake.

As part of the merger, Belden & Blake began a tender offer and consent solicitation to buy for cash any and all of its outstanding $225 million 9 7/8% senior subordinated notes due 2007.

The tender offer, which is subject to, among other things, closing of the merger and funding, expires on July 15.

Belden & Blake is a Canton, Ohio, oil and gas producer. Capital C is a Houston-based company that seeks to accumulate a portfolio of domestic oil and gas assets.

UTI ups term loan

UTI Corp. increased the size of its six-year term loan B to $194 million from $174 million and decreased the size of its bond deal that priced Wednesday to $175 million from $190 million, according to a market source.

"They're over funding by $5 million so there's cash on the balance sheet," the source added.

Pricing on the term loan remained unchanged at Libor plus 300 basis points.

UTI's credit facility also contains a $40 million five-year revolver with an interest rate of Libor plus 300 basis points and a 50 basis points commitment fee.

Credit Suisse First Boston is the sole lead arranger and bookrunner on the deal. Wachovia is the syndication agent.

Proceeds will be used to help fund the acquisition of MedSource Technologies Inc. Under the acquisition agreement, MedSource common stockholders will receive upon the closing of the merger $7.10 per share in cash. The total transaction value is about $230 million, including assumed net debt.

UTI has also received an equity financing commitment from DLJ Merchant Banking Partners to help fund the transaction.

The acquisition is expected to close this summer.

UTI is a Collegeville, Pa., provider of metal and plastic components, assemblies and finished devices to medical device manufacturers.

PlayCore rescheduled

PlayCore Inc.'s bank meeting to launch its proposed $145 million credit facility was pushed off until Friday from its originally expected date of Wednesday, according to a fund manager.

Credit Suisse First Boston is the sole lead arranger and bookrunner on the deal.

The facility consists of a $15 million five-year revolver, a $50 million five-year first-lien term loan, a $40 million six-year second-lien term loan and a $40 million 61/2-year third-lien term loan, the document said. Pricing is still to be determined.

Proceeds will be used for LBO financing, the document added. Currently, PlayCore is owned by Chartwell Investments.

PlayCore is a Chattanooga, Tenn., playground equipment manufacturer.

It's also been heard that Merisant Co.'s bank meeting has been pushed off to June 29. It was scheduled to take place on Wednesday. Final confirmation of this information was unavailable prior to press time.

Credit Suisse First Boston and RBC are the joint lead arrangers and joint bookrunners on the deal.

The theory seems to be that there is nothing about the specific deals affecting the timing, but rather Credit Suisse First Boston was so overloaded with bank meetings that they are trying to spread some launches out, a source said.

Merisant's $255 million credit facility consists of a $35 million five-year revolver, a $50 million six-year euro term loan and a $170 million six-year term loan B.

Proceeds will be used for recapitalization purposes.

As was previously reported, Tabletop Holdings Inc., the parent of Merisant Co., filed an S-1 registration statement in April with the Securities and Exchange Commission to offer up to $700 million of Income Deposit Securities and senior subordinated notes due 2014. Furthermore, the company revealed that it was working on putting together a new credit facility.

The Chicago low-calorie sweetener company will use proceeds to repay all the borrowings under Merisant's senior secured credit facility and to unwind interest rate hedges, tender for Tabletop's $136.0 million principal amount at maturity of 12¼% senior subordinated discount notes due 2014 and Merisant's $225.0 million principal amount of 9½% senior subordinated notes due 2013, to buy back some class B stock from existing stockholders and to make payments under existing management incentive plans.

Revlon oversubscribed

Talk that syndication of Revlon Consumers Products Corp.'s $750 million term loan (B3/B-) was going extremely well proved correct as, according to a number of market sources, the deal ended up being oversubscribed by Tuesday afternoon, just a couple of hours after launch.

According to one source, there seemed to be a lot of large commitments flooding into the books from hedge funds.

The six-year term loan is being talked at Libor plus 600 to 625 basis points and contains call protection of 105 in year one, 103 in year two, 102 in year three and 101 in year four.

There is only one financial covenant under the term loan and that is a maximum senior secured leverage test which is set at 51/2x at December 2004 and gradually reduces to 41/2x at the beginning of the first quarter of 2007.

Revlon's $910 million senior secured credit facility also contains a $160 million five-year asset-based revolving credit facility priced at Libor plus 250 basis points with an undrawn commitment fee of 50 basis points.

On a March 2004 last-12-months basis, total debt to EBIDTA is about 7.8x.

Proceeds will be used to refinance the existing credit facility that currently has about $290 million outstanding, to refinance the approximately $363 million 12% senior secured notes and to pay about $95 million in transactional fees and expenses, tender costs and accrued interest.

The company expects to complete the tender offer for the bonds and close on the credit facility sometime in mid-to-late July.

Citigroup is the lead bank on the proposed credit facility.

Revlon is a New York manufacturer and seller of cosmetics and skin care, fragrance and personal care products.

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