Nextel Communications giant term loan hits the secondary at par ½ bid, par ¾ offered

By Sara Rosenberg

New York, Dec. 5 - Nextel Communications Inc.'s $2.2 billion institutional tranche was free to trade as of Friday afternoon with the paper immediately moving higher to par ½ bid, par ¾ offered, according to a trader.

Just as a point of comparison, in mid-October Nextel's term loan D was quoted at par 5/8 bid and the term loans B and C were quoted at 101 bid following a favorable earnings announcement, with the tranches coming back in to par ¼ bid, par ¾ offered on the D loan and par 5/8 bid, par 7/8 on the B and C loans.

However, once news of the bank debt repayment/consolidation emerged in the bank loan market in November, all three of the tranches moved to par bid, 101 offered as investors anticipated being taken out at par.

The new term loan, which was priced with an interest rate of Libor plus 225 basis points, is the largest institutional piece of bank debt to hit the market in about three to four years, according to a market source. And, despite its enormous size, the deal managed to get a good reception and was well distributed throughout the marketplace, the source added.

Proceeds from this term loan are being used by the Reston, Va., wireless communications company to refinance/reprice the company's existing term loan B, C and D. Pricing on this new piece of bank debt is about 100 basis points lower than the company was paying before for the existing term loans, the source said.

JPMorgan is the lead bank on the transaction.

Nextel came to market with this deal toward the end of November due to favorable market conditions and improved financial performance, which led the company to believe that it could successfully obtain cost reductions and a strengthened balance sheet, a company spokesperson previously told Prospect News.

Mission Energy Holdings International Inc.'s $800 million three-year term loan B, upsized last week from $700 million, is expected to allocate and break for trading on Monday, according to a source close to the deal.

The facility has received more than $2 billion in commitments even after the deal underwent some changes last week. Those changes included an increase to the size and also a change in pricing to Libor plus 500 basis points from Libor plus 550 basis points and an increase in the offer price to 99½ from 99, the source said.

The 2% Libor floor remained intact throughout syndication.

The loan is intended to provide bridge financing to asset sales, including the sale of some or all of the company's international operations, depending upon, among other things, market prices, according to a filing with the Securities and Exchange Commission.

Security is 65% of the stock of MEC International and notes receivable totaling about $286 million at Sept. 30 held by Mission Energy Holdings International and EME UK International LLC.

Net proceeds from the loan will be used to make an equity contribution of about $550 million in Edison Mission Midwest Holdings, which, combined with cash on hand, will be used to repay Edison Mission Midwest Holdings' $781 million debt due on Dec. 11. Remaining net proceeds will be used to repay debt of a foreign subsidiary under the Coal and CapEx facility.

Since the debt that is going to be repaid comes due on Dec. 11, the syndicate is looking to officially close on the $800 million term loan by that date, the source added.

Citigroup, Credit Suisse First Boston, JPMorgan Chase Bank and Lehman Brothers Inc. provided the commitment for the deal.

Mission Energy is a subsidiary of the Rosemead, Calif., based energy company Edison Mission Energy.

Responses were due Friday from lenders on Argosy Gaming Co.'s proposal to amend its credit facility (Ba2) to lower pricing on the existing term loan to Libor plus 225 basis points from Libor plus 275 basis points. Furthermore, the amendment would contain a provision to allow the company to lower pricing even further to Libor plus 200 basis points if there is an upgrade in ratings.

The proposal was expected to pass since the company was willing to repay lenders who disagreed with the amendment at par, according to a market source. However, the syndicate could not be reached prior to press time to confirm that the amendment passed.

There is $269 million outstanding on the term loan. The company also has a $400 million revolver with a current interest rate of Libor plus 262.5 basis points, which will stay as is.

Wells Fargo is the agent on the loan.

Argosy Gaming is an Alton, Ill., owner and operator of riverboat casinos.

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