Nextel heads higher as demand outweighs supply; Qwest trades but activity level slowed

By Sara Rosenberg

New York, June 9 - Nextel Communications Inc.'s term loan B and term loan C traded almost a point higher on Monday, a move attributed to market technicals. Meanwhile, activity on Qwest Corp.'s new loan slowed down a bit after heavily trading at the end of last week.

Nextel's term loan B and C were quoted at 99 3/8 bid, 99 7/8 offered, with trades reported to have taken place as high as 993/4, according to a trader. The Reston, Va. wireless company's two tranches were quoted at 98¾ bid, 99¼ offered on Friday by the trader and 98 3/8 bid, 99 3/8 offered on the Street.

"It's purely technicals," the trader said in regards to Monday's run-up. "Some of the new funds ramping up and running out of BB assets to find."

During its first two days in the secondary bank loan market, Qwest was reported as trading quite actively, according to various sources. However, the activity level calmed down slightly on Monday, according to a trader, with levels remaining essentially in the same context. The floating rate tranche was quoted a drop lower at 101 bid, 101¼ offered and the fixed rate tranche was quoted at 99¾ bid, par ¼ offered, the trader said.

The deal broke for trading on Thursday, with the floating rate tranche quoted at 101 bid, 101½ offered and the fixed rate tranche quoted at 99¾ bid, par offered. On Friday, the floating rate tranche was quoted at 101½ bid, 102 offered and the fixed rate tranche was quoted at 99¾ bid, par offered.

Qwest closed on the new $1.75 billion credit facility on Monday, according to a syndicate source. Merrill Lynch & Co., Credit Suisse First Boston and Deutsche Bank arranged the deal, which will be used to refinance debt due in 2003 and fund business needs. Merrill Lynch acted as sole bookrunner and syndication agent.

The facility consists of a $1.25 billion four-year unsecured, non-amortizing senior term loan (Ba3/B-/B) with an interest rate of Libor plus 475 basis points and a $500 million fixed-rate incremental term loan due 2010 that has a 6.95% coupon and was sold at a discount to yield 7¼%, according to the syndicate source.

The floating rate tranche was offered at 99 and has a Libor floor of 175 basis points.

The Denver telecommunications company's facility launched early last week and was quickly oversubscribed, prompting Qwest to increase the size from the originally planned $1 billion floating rate term loan to the total of $1.75 billion divided between two tranches.

Over 100 investors and lenders participated in the credit facility, comprising a broad cross-section of institutional investors, according to a news release.

In fact, the deal managed to move along so quickly because there were hedge funds and high yield guys involved as opposed to banks who usually take longer to commit, according to market sources.

"We're very pleased with the tremendous progress we continue to make this year strengthening the company's financial position," said Oren Shaffer, vice chairman and chief financial officer, in the news release. "With the completion of this refinancing transaction, as well as the pending close of the second phase of the QwestDex sale, we expect Qwest's business plan to be fully funded based upon our ability to generate operating cash flow and continued access to capital markets."

"The completion of this loan marks another major step in the financial transformation of Qwest. We have reduced total principal borrowings by approximately $2.2 billion from previously announced debt exchanges. Combined with the expected QwestDex sale total gross proceeds of $7.1 billion from phase one and two, the company will generate over $9 billion in cash liquidity and debt reduction," said Janet Cooper, senior vice president and treasurer, in the release. "The market response is an affirmation that the steps we've undertaken to transform the balance sheet are working. We will continue our progress and monitor conditions for additional strategic transactions."

In follow-up news, Riverwood Holding Inc.'s recently launched credit facility is already oversubscribed on the B loan and is about a quarter done on the revolver. The $850 million seven-year term loan B has received over $1.4 billion plus in commitments and three managing agents have joined the $400 million six-year revolver with $40 million in commitments each for a total of $120 million, a source close to the deal told Prospect News on Monday.

"All the guys that have Riverwood or Graphic Packaging need to re-ante anyway," a market professional said in response to learning just how well the term loan B is doing.

The $1.6 billion credit facility that launched on Thursday also contains a $350 million six-year term loan A.

Pricing on the term loan B and the revolver is Libor plus 300 basis points, and the term loan A is priced at Libor plus 275 basis points.

Asked why the revolver was priced in line with the institutional piece rather than with the term loan A, a syndicate source responded: "The A's are pretty attractive. This was we make sure the B loan trades well."

The term loan B is being offered at par. On the pro rata, a commitment of $25 million will get 150 basis points and a commitment of $15 million will get 125 basis points.

JPMorgan, Deutsche Bank, Goldman Sachs and Morgan Stanley are the lead banks on the deal.

Proceeds will be used to help fund the merger between Riverwood and Graphic Packaging International Corp.

Riverwood is an Atlanta provider of paperboard packaging solutions to multinational beverage and consumer products companies. Graphic Packaging is a Golden, Colo. folding carton packaging supplier to the food, beverage and other consumable products markets.

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