Nextel up on earnings; Sinclair plans add-on, Wynn still held up

By Paul Deckelman

New York, Oct. 24 - Nextel Communications Inc. bonds were solidly higher Thursday, after the wireless communications provider reported a third-quarter profit and improved subscriber numbers.

In the primary sphere, Sinclair Broadcast Group Inc., prepared to bring a quickly-shopped $150 million add-on deal to market.

Meanwhile, junk players continued to watch Wynn Resorts LLC's efforts to complete its planned initial public offering, whose difficulties have pushed back the company's planned junk bond offering. Price talk meantime emerged on that offering, which has been upsized in order to provide the same level of proceeds.

Las Vegas-based casino operator Wynn is hoping to realize $340 million from the junk deal, to go along with the roughly $450 million it hopes to net from its IPO and $1 billion of bank financing, all of which will be used to help finance the building of its glitzy new Le Reve casino resort on the fabled Las Vegas Strip.

Timing of the deal hinges on the completion of the IPO. According to pre-deal market price talk, the bonds are expected to price at a substantial discount to par, which forced the company to increase the principal amount of the offering to $365 million from $340 million originally (see related story elsewhere in this issue).

Apart from the Wynn deal, primary-side participants noted Sinclair Broadcast's planned add-on to its outstanding 8% senior subordinated notes due 2012. That offering is expected to come to market Friday morning via a Deutsche Bank Securities Inc. underwriting group which also includes co-lead managers J.P. Morgan and Wachovia Securities, Inc., which collaborated with Deutsche to bring the original issue of 8% notes to market back in March.

Elsewhere, Russian gas company Gazprom was heard to have priced a $200 million add-on to its existing $500 million of putable 10½% notes due 2009. Details on the deal were sketchy, but it was believed that Credit Suisse First Boston and Salomon Smith Barney had been the joint bookrunning managers although that could not be confirmed.

Back in the secondary market, a source said that Sinclair's existing 8% notes, which had been recently holding around the 100.5 bid level at which the new bonds are expected to price, had firmed slightly to 101.125 bid.

Among already existing issues, Nextel bonds rose after the Reston, Va.-based wireless communications company reported third-quarter earnings of $526 million (58 cents per share), versus a year-ago loss of $209 million (26 cents per share). It was the second consecutive quarter in which the Number-Five U.S. wireless operator posted a profit - no small feat for a start-up telecommunications company, given the currently negative environment for the once high-flying industry. Even excluding a special one-time gain of $401 million (44 cents a share) related to its early retirement of $1.5 billion of debt and preferred stock, Nextel still earned $128 million (14 cents per share) in the quarter, well above the four cents per share that analysts had been expecting.

Nextel reported EBITDA for the quarter of $878 million, up sequentially from the $816 million of cash flow seen in the second quarter, and up 67% from the $526 million reported a year ago.

Nextel also said that it had added 480,000 net new subscribers during the quarter, up from 471,000 subscriber adds in the previous quarter. That put Nextel's total domestic subscriber base at 10.1 million customers as of the end of the third quarter.

The news caused Nextel shares, which had closed Wednesday at $10.20, to jump as high as $11.53 during the session, but by the end of the day, it had given all of those gains back, and then some, on apparent profit-taking, actually closing down 14 cents at $10.06.

On the bond side of the ledger, Nextel managed to finish in the black on the day, although there too, below its peak levels. A trader quoted the company's benchmark 9 3/8% notes due 2009 as having gotten as high as 83 bid after opening at 81.5. The bonds came slightly off that peak level to close at 82.5 bid, 83.5 offered, up about 1½ points on the day. Nextel's 10.65% notes due 2007 were seen up nearly two points, at 89 bid.

A market source, who quoted the 9 3/8s as having firmed as high as 84 during the day, said that while Nextel's actual gain wasn't that much - he put it at about a point - "they have been moving up over the past week."

Nextel wasn't the only wireless company reporting favorable numbers. Investment-grade wireless operator AT&T Wireless Services Inc. posted strong third-quarter numbers late Wednesday. That caused its shares to jump on Thursday, when they were up $1 (18.35%) to $6.45, on volume of 40 million shares, about four times normal. Its 7 7/8% notes due 2011 rose to 81.5 bid from Wednesday's close at 76; its 8 1/8% notes due 2012 pushed up to 82 bid from 76.5; and its 8¾% bonds due 2031 finished three points higher on the session at 75. The bonds have been trading for some weeks in dollar price terms, as junk bonds would, despite their nominally investment grade ratings, due to the ongoing difficulties of the telecom sector.

Junk bonds issued by its affiliate, Triton PCS, were also sharply higher, with the latter's 8 ¾% notes due 2011 quoted at 73 bid, up 5½ points. Triton's zero-coupon notes due 2008 were five points better at 72 bid, while its 9 3/8% notes due 2011 went from 69 bid Wednesday to 73 bid. Its shares zoomed 64 cents (34.78%) to end at $2.48.

Communications antenna tower companies - which lease space on their towers to Nextel and other wireless operators - were likewise on the upside, with American Tower Corp.'s 9 3/8% notes due 2009 up nearly three points at 55.5 bid; SBA Communications Corp.'s 10¼% notes due 2009 were quoted two points better, at 46, while Crown Castle International Corp.'s 10 7/8% notes due 2011 were three points better, at 75.

Outside of the telecom names, Fleming Cos., which had reported third quarter results on Wednesday, pushed higher on apparent investor relief that the wholesale grocery products company was able to meet its lowered expectations, combined with a rise in its shares that some in the market attributed to short covering.

Fleming's 10 1/8% notes got as high as 84 bid, a trader said, versus last week's levels of 75-6 bid, while its subordinated paper pushed up to 61 bid/65 offered from week-ago levels around 50 bid/52 offered. Its shares meantime rose 27 cents (4.3%) to $6.57.

On the downside, Charter Communications bonds continued the slide triggered earlier in the week with the abrupt placement on leave of its chief operating officer; its benchmark 8 5/8% notes due 2009, which had traded in the low-to-mid 50s just a week ago, were seen around 37 bid/38 offered Thursday, down about three points on the session and almost 15 on the week. The troubled St. Louis-based cable operator's shares, which have slid in tandem with the bonds, were also down again, closing at 94 cents - down 13 cents (12.15%) on the session.

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