Nextel bid higher on positive earnings; Quality Distribution details firm up ahead of Tuesday's meeting

By Sara Rosenberg

New York, Oct. 16 - Nextel Communications Inc.'s bank debt headed higher during market hours on the heels of favorable earnings news, with bids pushing up by about a quarter point or more depending on the tranche and then coming back in by day's end. Meanwhile, some new details have emerged on Quality Distribution Inc.'s proposed credit facility, including changes in the initially expected size of the deal, a change in initially expected timing and pricing.

Nextel's term loan D was quoted at par 5/8 bid, up from par ¼ bid, par ¾ offered, while the term loan B and term loan C were quoted at 101 bid, up from par ¾ bid, according to a trader. "Earnings were pretty good," the trader added.

However, according to a second trader, the D tranche ended the day back basically in line with previous levels of par ¼ bid, par ¾ offered and the B, C tranches ended at par 5/8 bid, par 7/8 offered.

"That's how things work. They run up a little bit and then come back in," the trader explained.

On Thursday morning, the Reston, Va. wireless company reported third quarter results that included income of $346 million, or $0.33 per share including debt retirement charges, revenue of $2.9 billion, a 27% increase over the previous third quarter, operating income before depreciation and amortization of $1.13 billion, up 29% from the same period last year, record quarterly subscriber additions of 646,000 and a reduction in net debt to under $9 billion.

Furthermore, the company raised its 2003 guidance, targeting free cash flow of $1 billion or more, up from $600 million, $1.15 or more in earnings per share, up from at least $1.00, operating income before depreciation and amortization of $4.1 billion or more, up from $3.9 billion and net subscriber additions (excluding Boost Mobile) of approximately 2.2 million, up from 1.9 million or more.

"Nextel's passion is to help people get things done. Increasing customer demand for our services has once again led to record revenue and profitability performance," said Tim Donahue, president and chief executive officer, in a news release. "Nextel continues to distance itself from the competition by growing the lifetime value of the industry's best customers. We're looking forward to a strong finish to 2003 and, once again, we are raising our guidance, in our relentless drive to be the leader in wireless communications."

And, in a conference call that was held to discuss the earnings results, Nextel emphasized its commitment to achieving investment grade status through continued debt reduction (see story elsewhere in this issue).

Quality Distribution's facility is now sized at $235 million, consisting of a $140 million six-year delayed draw term loan, a $75 million five-year revolver and a $20 million six-year synthetic term loan. Previously, the deal was anticipated to be sized at $200 million, consisting of a $140 million delayed draw term loan and a $60 million revolver.

A bank meeting for the facility is now scheduled for Oct. 21 as opposed to the previously anticipated launch date of Oct. 17.

All three tranches are priced with an interest rate of Libor plus 350 basis points. The delayed draw term loan and the revolver both carry a commitment fee of 50 basis points, according to a syndicate release.

Credit Suisse First Boston is the lead arranger and bookrunner on the deal with Deutsche Bank acting as joint lead arranger and syndication agent and Bear Stearns participating in the syndicate as well.

Security for the loan, which is being obtained in conjunction with an initial public offering, is a first priority perfected lien on substantially all of the company's properties and assets.

The IPO is conditioned not only on the successful completion of the new credit facility but also on a private offering by Quality Distribution LLC, a wholly owned subsidiary, of unsecured notes, and the exchange of all outstanding shares of its 13.75% preferred stock for common stock, according to a filing with the Securities and Exchange Commission.

Revolver borrowings will be used for working capital and general company purposes, including effecting certain permitted acquisitions. Term loan borrowings will be used to repay existing debt.

More specifically, Quality Distribution plans to use proceeds of $115 million from the IPO, proceeds of $125 million from the note sale and $149.953 million from the credit facility to repay the $279.278 million outstanding under the existing credit facility, redeem the $57.548 million 12.5% senior subordinated secured notes, redeem the $18.1 million 10% senior subordinated notes, redeem the $14.027 million 12% junior PIK notes and pay $21 million in transaction fees and expenses.

Quality Distribution is a Tampa, Fla. operator of a bulk tank truck network.

Pinnacle Foods Corp.'s credit facility, which is being maneuvered and revised to incorporate Aurora Foods Inc. into the transaction, is now anticipated to be able to contain up to $500 million in term loan B debt, a source close to the deal told Prospect News, adding that specific details and sizes have not really been nailed down as of yet.

On Tuesday, Aurora announced that it has revised its previously announced financial restructuring and entered into a letter of intent with J.P. Morgan Partners LLC, J.W. Childs Equity Partners III LP, an informal committee of bondholders representing approximately 50% of the company's outstanding senior subordinated notes and C. Dean Metropoulos and Co., under which Aurora will be combined with Pinnacle Foods.

Previously Pinnacle Foods' facility was expected to be sized at $225 million, consisting of a $170 million term loan B and $55 million of pro rata bank debt.

JPMorgan and Deutsche are the lead banks on the deal that will be used to help fund the previously announced acquisition of Pinnacle Foods by JPMorgan Partners, in partnership with C. Dean Metropoulos, from Hicks, Muse, Tate & Furst Inc.

Pinnacle Foods is a Cherry Hill, N.J. manufacturer and marketer of branded food products formed by Hicks, Muse, Tate & Furst and C. Dean Metropoulos in 2001 to acquire Swanson frozen foods, Vlasic pickles and condiments, and Open Pit barbeque sauce from Vlasic Foods International. Aurora Foods is a St. Louis producer and marketer of leading food brands.

Qwest Communications International Inc.'s bank debt was basically unchanged in the secondary despite news that the company completed its restatement of 2001 and 2000 financials and that it has filed a 10-K for reporting periods 2000 through 2002 with the Securities and Exchange Commission.

"It already ran up, so how much higher can it get?" a trader asked, quoting the floating-rate tranche at 103¼ bid, 103¾ offered and the fixed-rate tranche at 99¼ bid, 99¾ offered.

"This is a very important day for Qwest. With the restatement complete, we are now focusing all of our resources to dramatically improve customer satisfaction and grow our key lines of business," said Richard C. Notebaert, chairman and chief executive officer, in a news release.

The Denver telecommunications company also announced a number of dates for additional disclosures and filings. The 2002 proxy and annual report will be mailed to shareowners the week of Oct. 27, the company's annual meeting will be held on Dec. 16 and 10-Q quarterly statements for the impacted periods of the restatement will be filed as soon as possible.

In July 2002, Qwest announced plans to restate financial results based on an internal analysis conducted by the company and its outside auditors, KPMG. As a result of this work and with Thursday's 10-K filing, the company's financials are now GAAP-compliant for 2000 through 2002.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.