Competent earnings lift Nextel, Xerox; Allegheny and Calpine continue to strengthen

By Carlise Newman

Chicago, April 23 - A slew of earnings reports Wednesday brought some activity to a market recently stifled by Easter and Passover holidays. Lucent Technologies Inc., Nextel Communications and Xerox Corp. firmed overall on good news about their balance sheets. Allegheny Energy continued its trek higher, boosted by an overall warming to the company in the markets.

Xerox Corp. was better bid across the board during market hours, according to a trader, who added that the revolver was bid around 971/2, and the term loan A was bid around 981/2. Another trader quoted Xerox's revolver bid at 99¾ and offered at par. As a comparison, on April 15, LoanX put the revolver bid at 94.08.

"It's quiet today, not a lot of activity. But it's firmed up quite a bit recently," he said.

On Wednesday the office equipment maker posted a first-quarter net loss, hurt by one-time litigation costs, but it reported strong operating profit.

The charge pushed Xerox to a first-quarter net loss of $75 million. Its total net loss, before preferred stock dividends, was $65 million, compared with a net loss of $114 million a year earlier.

"It's better," said a trader. "The stock is up. The earnings are good. And I have seen some tightening in that credit," said a trader.

There was no further word on rumors that Xerox is planning a major debt refinancing.

Asked about the market talk on the company's earnings conference call, chief financial officer Lawrence Zimmerman said: "There's rumors all the time about what exactly we might or might not be doing. I'm not going to comment on the rumors."

Questioned on whether the company planned to refinance or access the capital markets, he said: "I think those are always options. We are going to do it when we think it's the best for the shareholders of Xerox so we are constantly evaluating and thinking about it."

Nextel's news Wednesday also cheered the company's bank debt. Nextel's term loans B and C were both quoted at 97¾ bid, 98 offered, up ¾ point, according to a trader.

Nextel posted first-quarter net income of $208 million, compared with a year-ago loss of $654 million. Revenue rose to $2.37 billion from $2 billion. The company also said it retired about $568 million in debt and preferred stock during the quarter. It had $12.7 billion of debt and redeemable preferred stock remaining as of March 31.

"Nextel was a little stronger. The earnings helped," said a trader.

Lucent's bank debt was also seen firmer after the company posted a loss but beat analyst expectations.

Allegheny Energy was seen higher Wednesday as well, continuing a trend of energy companies with better value in recent weeks after a trail of refinancings hit the sector. Allegheny was quoted bid at 98 and offered at par.

"Overall the market just continues to view it well," said a trader of the Hagerstown, Md. energy company.

Dynegy Inc., Reliant Resources Inc. and AES Energy announced refinancing deals in recent weeks, and Calpine Corp. has been rumored to be heading in the same direction.

Calpine Corp.'s bank debt was seen at 95, up "a half-point" from Tuesday's levels according to one trader.

In other news, Rite Aid Corp. held the bank meeting for its new $2 billion senior secured credit facility. The loan is anticipated to consist of an $850 million revolver, with price talk in the area of Libor plus 350 basis points, and a $1.15 billion term loan with price talk of Libor plus 375 basis points, Prospect News reported Tuesday. The facility matures in 2008.

On Wednesday, Standard & Poor's assigned its BB rating to the pending credit facility. S&P also raised the corporate credit rating on Rite Aid Corp. and Rite Aid Lease Management Co. to B+ from B, and the ratings on the senior secured second-lien notes to B+ from B-.

Rite Aid plans to use the net proceeds from the credit facility and the recently issued $360 million senior secured notes to refinance amounts outstanding under the existing $1.9 billion credit facility and the $107 million synthetic lease.

S&P also affirmed its B- rating on senior unsecured notes and its CCC+ rating on Rite Aid's preferred stock. All ratings were removed from CreditWatch.

Rite Aid is a Camp Hill, Pa.-based retail drugstore chain.

"The rating action reflects Rite Aid's improved operating performance over the past three years and the strengthening of its balance sheet as a result of the company's $2.0 billion credit facility and recent $360 million notes offering," said Standard & Poor's credit analyst Diane Shand. The new capital structure lengthens significant maturities to 2008 and improves the company's liquidity.

In follow-up news, Amkor Technology Inc. closed on its new $200 million (Ba3/B+) senior secured credit facility, consisting of a $170 million term loan maturing January 31, 2006 and a $30 million available through October 31, 2005. The term loan matures at a rate of Libor plus 400 basis points, and the revolver at Libor plus 4.25 basis points.

The funds will be used to repay the $97 million term loan outstanding under the existing credit facility and for general corporate purposes. Citibank and JPMorgan are the lead co-arrangers on the deal.

The new credit facility replaces Amkor's existing $197 million senior secured credit facility, which includes a $97 million term loan and a $100 million revolving credit facility that were scheduled to mature September 30, 2005 and March 31, 2005, respectively.

Amkor is a West Chester, Pa. provider of semiconductor assembly and test services.

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