Nextel inches up following upbeat fourth quarter 2002 and 2003 predictions

By Sara Rosenberg

New York, Jan. 8 - Nextel Communications Inc.'s term loan B moved up about a point in secondary trading on Wednesday as the company released optimistic guidelines for 2003, including achieving positive free cash flow.

"By all measures, 2002 was an extremely successful year for Nextel," said Tim Donahue, president and chief executive officer, in a news release. "Not only did we accomplish our goal to gain more than 1.9 million net new subscribers, but we expect to generate at least $3.1 billion in operating cash flow and also reduce capital expenditures by more than 20% over 2001, to under $1.9 billion. In addition, during 2002 we significantly improved our balance sheet by reducing debt, and achieved positive net income, which are record achievements for Nextel.

"All our indications are pointing to achieving positive free cash flow in 2003. We'll do this by maintaining our focus of attracting and keeping the most valuable customers in the wireless industry while at the same time streamlining our cost structure. We'll also continue to lead the industry with rational pricing of wireless service, price plan packages and equipment subsidies," Donahue concluded.

Details of 2002 year-end financial results will be announced toward the end of February. However, the company did reveal that sales in December were the strongest in Nextel's history. This achievement was attributed in part to robust sales across all channels, particularly lower-cost distribution channels.

The Reston, Va. telecommunications company's term loan B and tem loan C were quoted with a 94 bid and a 95 offer, according to a trader, who said that the debt was about a point lower on Tuesday.

Jack in the Box Inc.'s Tuesday launch of a $300 million credit facility sparked some interest among potential investors who took part in the bank meeting, according to a fund manager.

"It sounds pretty decent," the fund manager said. "I'm not the most excited about restaurants. It's a very competitive market.

"[Jack in the Box's] leverage and credit stats look pretty good," the fund manager continued. "It has pretty decent pricing for the rating. People sounded interested. I'm interested. First glance, it sounds sort of appealing."

The proposed loan consists of a $125 million 41/2-year term loan with an interest rate of Libor plus 350 basis points and a $175 million three-year revolver with an interest rate of Libor plus 250 basis points.

Standard & Poor's rated Jack in the Box's $300 million senior secured credit facility at BB+ on Wednesday.

S&P said it expects secured lenders would achieve "substantial recovery" should the company run into trouble, explaining that it "believes that Jack in the Box would be reorganized under a default scenario rather than liquidated based on its established brand. A distressed scenario could occur due to the intense competition within the restaurant industry exacerbated by the company's highly leveraged capital structure."

Ratings reflect the company's solid regional presence, good operating performance and ability to develop and market new products, S&P said. These factors are partially offset by the competitive quick-service segment of the restaurant industry.

Wachovia is the lead bank on the credit facility.

This launch was the company's second attempt at syndicating and obtaining a new credit facility. Originally, the company launched a $275 million three-year revolver in December, according to market sources, that was priced with an interest rate of Libor plus 150 basis points. However, the deal was not successful so a term loan was added to the structure and the revolver was reduced in size in order to "slow down risk," a source previously told Prospect News.

When the deal was originally launched in December, Fleet, U.S. Bank and Rabobank participated in the revolver, the source said. "My guess is they'll be tapped to do this [new] deal on the revolver," he added.

Jack in the Box is a San Diego operator and franchiser of hamburger restaurants.

In follow-up news, allocations on O'Charley's Inc.'s credit facility are expected to be given out either at the end of this week or early next week, according to a fund manager, who added that he expects that the allocations will be done on Monday since the week is more than half gone already.

In late December, the credit facility was restructured to reduce the size of the term loan, increase pricing on the term loan and increase the size of the revolver.

More specifically, the term loan B was reduced to $100 million from an original size of $150 million and pricing was flexed up by 25 basis points to Libor plus 400 basis points. Furthermore, the revolver was increased to $200 million from $135 million. Pricing on the revolver remained at Libor plus 250 basis points.

"The changes got them over the hump," the fund manager commented. "People have concerns about the competitive nature [of the restaurant sector] and it's a regional chain. People were looking for more return if they're taking that kind of risk."

Wachovia is the lead bank on the loan.

The facility will be used to help the Nashville restaurant chain fund its acquisition of Ninety Nine Restaurant & Pub.

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