Nextel active on second day of earnings' effects; Xerox soars on refinancing talk

By Carlise Newman

Chicago, April 24 - Wednesday's effects appeared to be the focus of bank loan trading Thursday, as the market focused on the prior day's earnings news. Nextel Communications Corp. remained active after releasing a stellar earnings report Wednesday that showed a boost in customers, sales and profit. Xerox Corp.'s report went over quite well also, despite a first-quarter net loss, but its bank debt was higher likely due to the widespread talk of a refinancing for the company.

In addition, AT&T Corp.'s better-than-expected first-quarter report Wednesday lifted the telecom/cable sector, causing Charter Communications Corp. to rise.

Charter's term loan B - actively traded earlier in the week - made a reappearance on trading desks Thursday at 91¼ bid, 91¾ offered, a quarter-point higher than Wednesday's price of 91. The St. Louis cable company's bank debt had been quoted at 90 1/8 bid, 91¾ offered on Monday.

Nextel, cheered on Wednesday by its noteworthy first-quarter earnings, rose again Thursday. Nextel's term loan A traded at 95. Its term loans B and C were seen "a little higher" at 98¼ bid, 98½ offered, up from 97¾ bid, 98 offered, according to a trader. Nextel's term loan D was seen at 97.

"It was a free-for-all yesterday in Nextel and a little quieter today but still very active," said a trader.

On Wednesday Reston, Va.-based Nextel posted first-quarter net income of $208 million, or 20 cents a share, compared with a year-ago loss of $654 million, or 84 cents a share. 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 had been expected to earn 16 cents, according to the consensus of analysts surveyed by Thomson First Call.

Xerox soared on Thursday, boosted by increased discussion about a possible refinancing for the office equipment maker. Xerox's revolver was bid at 99, up from 97½ Wednesday. The term loans A and B were "closing in on par" according to a trader. The term loans A and B were bid at 98½ Wednesday.

"Everything is close to par now because of the refinancing," said the trader. "We heard and read what everyone else has, that it's definitely being planned."

"Stay tuned on that one," added a market professional.

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 Stamford, Conn.-based 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.

During its earnings conference call, Xerox declined to comment on what it called "speculation" about its refinancing plans.

Nortel Networks Corp.'s bank debt was quoted in the high 90s Thursday. Nortel was also part of the slew of major earnings reports out this week, reporting its first profit in three years on Thursday morning. The Toronto-based telecommunications company reported a first-quarter profit of $54 million, or 1 cent a share, versus a loss of $841 million, or 26 cents, a year earlier.

Nortel has cut thousands of jobs, closed operations, written off unpaid customer contracts and marked down the worth of assets whose value has declined. Those cost cuts have helped to stabilize its business after three years of a downward spiral.

"The market was better bid across the board today, on all these good reports," said a trader.

AES Corp.'s term loan B and term loan C were seen trading at par Thursday, active due to an "overall good feeling" about energy companies. In addition, the Arlington, Va. power company announced a $1 billion bond deal early Thursday. The roadshow begins Friday for the Rule 144A offering of second priority senior secured notes due 2013 (B+).

In kind, other energy companies were reportedly active. Hagerstown, Md.-based Allegheny Energy was seen higher, continuing the trend of energy companies with better value in recent weeks after a trail of refinancings hit the sector. Allegheny was quoted bid at 98¼ and offered at 1001/4.

Calpine Corp.'s bank debt was seen bid at 95 1/8 and offered at 961/2, slightly higher than Wednesday, when it was bid at 95, according to a trader.

In primary news, Jafra Cosmetics International Inc. is expected to launch a $100 million loan Friday, according to a report from Credit Suisse First Boston. CSFB is the administrative agent on the loan and Merrill Lynch is the syndication agent.

The loan consists of a $40 million five-year revolver and a $60 million five-year term loan A and is part of Jafra's previously reported refinancing. Interest rates are to be determined.

© 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.