Nextel, Charter bank debt falls slightly after strong performances on seller activity

By Sara Rosenberg

New York, Jan. 10 - Nextel Communications Inc. and Charter Communications Inc. took a little breather Friday after having been very well bid recently as sellers decided to take the opportunity to get rid of some paper at a time when the bank debt may be at its high, according to a trader.

Nextel's term loan B and term loan C bank debt was quoted with a 94¼ bid and a 94¾ offer, down about 3/8, the trader said, explaining that the run-up on the paper was so quick that people decided it might be good time to sell.

On Thursday a different trader told Prospect News that the paper "locked at 95" after moving up about a point to a 94 bid and a 95 offer on Wednesday.

The Reston, Va. telecommunications company's paper had previously rallied on optimistic guidelines for 2003, including achieving positive free cash flow.

As a point of comparison, during mid-July, Nextel's B, C bank debt moved traded as high as 86 and settled down to quotes of around 83/84 (up about two points from the prior day's performance) immediately after the company announced positive second quarter results, which included a first-time achievement of positive net income. By mid-August the paper remained in the 83/84 region and by mid-October it had reached levels of 861/2/871/2, again on favorable earnings expectations. By Nov. 21, the company's paper had already reached levels in the low 90's.

Charter's bank debt was offered at 87 3/8 on Friday, off only about ¼ point. However, the St. Louis cable company's bank debt has "been very well bid for so long" that the minute drop in pricing was worth noticing, the trader said.

"Charter held in there [but] it looks like it's coming off its highs," he added.

However, there was a short-time frame in December during which Charter's performance was touch and go. The paper fell by about a point to around 84/85 after the company announced management changes, the re-audit of its 2000 and 2001 financial statements, and the anticipation that the growth rate of fourth quarter revenue will be at or near the low end of its prior revenue guidance of 8 to 9% and fourth quarter operating cash flow will be less than previous guidance.

In other news, Tenet Healthcare Corp.'s $500 million three-year senior unsecured term loan that is scheduled to launch this month has caught the eye of some non-investment grade investors since it falls right on the cusp between investment grade and leveraged and it carries an interest rate of Libor plus 200 basis points, a market professional told Prospect News.

Banc of America Securities LLC, Citigroup and SunTrust Bank are joint lead arrangers on the facility.

The new facility will replace the company's existing $500 million 364-day revolver, which is undrawn and matures on Feb. 28. It is expected to include terms and conditions substantially similar to existing credit agreements, except for a change in the leverage covenant to a maximum of 2.5 times debt to EBITDA in the new facility from 3.5 times in the existing credit agreements.

"They're trying to solve problems with covenants," the professional said. But, he added: "It's a cuspy credit under huge investigation. It struck me as interesting. I'm vaguely skeptical that it's an easy deal to do. The investigation was announced yesterday. That could make things a little squirrelly."

On Thursday, the company announced that the Department of Justice had indicated it would file a lawsuit against Tenet since talks regarding a long-standing investigation of certain Medicare diagnosis-related groups coding had hit a standstill. And, according to various media reports, the Department of Justice then filed a lawsuit on Thursday seeking more than $300 million from Tenet.

"In a letter to shareholders last month, the company said that the two sides had held lengthy negotiations in an effort to resolve the dispute, but remained far apart on settlement terms and that litigation of the issue was possible. In discussions Wednesday, the two sides still remained far apart and DOJ representatives signaled their intent to proceed with litigation," a news release said.

Proceeds from the loan will be used to reduce borrowings under the existing $1.5 billion multi-year revolver due in 2006.

The loan is expected to close by late February.

Tenet Healthcare is a Santa Barbara, Calif. investor-owned healthcare services company.

In follow-up news, US Investigations Services Inc. closed on its $330 million senior credit facility (B1/BB-) in conjunction with the completion of its recapitalization led by Welsh, Carson, Anderson & Stowe. Lehman Brothers acted as sole lead arranger and administrative agent and Banc One acted as syndication agent.

As part of the recapitalization Welsh, Carson and its affiliates will invest $545 million in a combination of subordinated debt and common equity to acquire a majority interest in USIS. The Carlyle Group, who has been a minority investor in the Company since 1999, together with the senior management of USIS, also reinvested a total of $172 million in the Company.

USIS is an Annandale, Pa. provider of security support to government agencies and commercial entities.

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