Nextel bonds jump as company may raise forecast; Antargaz, Carmeuse deals price

By Paul Deckelman and Paul A. Harris

New York, July 12 - Nextel Communications Inc. bonds and shares shot up Friday on a news report that the company may raise its earnings forecast. That also gave a boost to other names in the recently beleaguered wireless telecommunications sector. Nextel's good news was the only major feature seen in an otherwise pretty bland secondary market Friday.

Meanwhile news from the high yield primary market took on a decidedly Continental flavor Friday as both of the deals that priced were eurobond offerings - one each from Antargaz and Carmeuse Lime, BV.

And another European company, ProSiebenSat.1 Media AG, let it be known that it would hit the road with a euro deal on Tuesday.

However, in spite of the noted difficulties that the U.S. dollar is having in the international currency bazaars, sell-side sources (some of them on the syndicates of euro deals recently or presently on the calendar) tell Prospect News that the marked increase in euro-denominated issuance is unlikely to be significantly tied to the dollar's slide.

"That line of thinking is certainly true for big investment-grade companies," one sell-side official explained to Prospect News on Friday. "If you're a Fortune 500 company your financing is so flexible that you can sit around and watch a variety of currencies and save 25 basis points if something moves a particular way.

"But if you're a high-yield issuer you need the money and you need it now."

Earlier in the week another sell-sider said that bringing a deal in Europe is a somewhat slower process than in the U.S.

"That market is a little choppier so people don't tend to be working on transactions to come to market unless they are pretty confident of new issue conditions," this source explained.

"So once the market feels good people will start working on deals. They will print documents, etc, whereas in the U.S. market you have an easier opportunity to be forward-thinking about what market conditions will be like just because it's a more liquid market."

However Kathleen Gaffney, vice president and portfolio manager of the Loomis Sayles High Income Funds, was heard to swallow hard when Prospect News ran the "coincidence" theory by her on Thursday. A marked pickup in euro deals just as the dollar is taking a solid beating might actually transcend the bounds of coincidence, she suggested.

Coincidence or not, most of Friday's primary market activity derived from Europe.

Antargaz, issuing via AGZ Finance, SA upsized its offering to €165 million from €150 million and priced the nine-year senior notes (B2/B) at par to yield 10%, in the middle of the 9 7/8%-10 1/8% price talk. Bookrunners were Deutsche Bank Securities Inc. and Credit Lyonnais.

Benelux-based lime producer Carmeuse Lime priced its two-piece fixed- and floating-rate senior secured note offering (Ba3/BB-). The deal was restructured from a single tranche of €250 million of senior secured notes earlier in the week. The company priced the €175 million fixed-rate tranche, due July 15, 2012, at 98.505 to yield 11%. Price talk was 10½%-11%. The €75 million of five-year floaters priced at par. BNP Paribas was the bookrunner.

German media company ProSiebenSat took a position on the forward calendar Friday as the market learned that the three-day Europe-only roadshow on its €200 million of senior notes due 2009 (BB+) via Deutsche Bank Securities would kick off on Tuesday.

Also on Friday the market heard that Workflow Management, Inc. has postponed its offering of $170 million of seven-year senior secured notes (B2/B+), via Jefferies & Co. No syndicate or company sources were available for comment late in Friday's session.

Secondary activity on Friday was generally "pretty dead," a trader said, noting that "people had already left at 3 [p.m. ET, an hour before the official trading end]."

But against that humdrum backdrop, "Nextel was flying," another trader said, quoting the Reston, Va.-based wireless telecom operator's benchmark 9 3/8% notes due 2009 as having zoomed to 61 bid/62 offered from prior levels around 52 bid.53 offered. Nextel's zero-coupon notes due 2008 were meanwhile seen up six points on the session, at 59 bid. At another desk, Nextel's 9½% notes due 2011 were seen up a more restrained 3½ points at 54.5 bid.

On the stock side, Nextel's shares soared $1.08 (32.53%) in Friday's Nasdaq trading, to end at $4.40. Volume of 49 million shares was triple the usual.

Bloomberg News reported that Nextel - which is expected to release its second-quarter results Tuesday - is likely to raise its 2002 EBITDA projections for its U.S. operations, in the view of Legg Mason Wood Walker Inc. equity analyst Craig Mallitz. The report also quoted Mallitz as predicting that Nextel will probably beat his estimate for second-quarter U.S. cash flow of $645 million.

The Bloomberg story further quoted another equity analyst - Alex Trofimoff of Sanford C. Bernstein & Co. - as attributing some of the sharp gains in the company's shares Friday to market speculation that Nextel will repurchase some bonds or preferred stock to reduce future interest payments. He said that Nextel might spend anywhere from $500 million to $700 million to buy back notes and preferred shares. The analyst said that a buyback of some of Nextel's $14 billion of debt with the business generating more cash than originally forecast would inspire confidence in the shareholders as well as reducing future interest costs.

Nextel's gains, said the trader, had long coat tails, "propelling some of the other guys like Triton PCS and U.S. Unwired." He saw AT&T Wireless affiliate Triton's 9 3/8% notes finishing at 65 bid/67 offered, up from 92 bid/94 offered on Thursday, while U.S. Unwired's zero-coupon notes went up to 30 bid from opening levels around 27 bid/29 offered. "The whole wireless sector was up on that," he added.

Another wireless name which was seen higher on Friday - for reasons quite apart from Nextel's possible improved guidance - was VoiceStream Wireless, the Bellevue, Wash.-based wireless operator bought last year by Deutsche Telekom and now said to carry a "for sale" sign as the German giant tries to slash its bloated debt load.

Recent market chatter has had VoiceStream linking up with AT&T Wireless, which sent VoiceStream's 10 3/8% notes firming to levels in the mid-90s by mid-week. But those bonds dropped back into the lower 90s on Thursday, as speculation about an AT&T deal fizzled. The debt, however, yo-yoed back up to 95 bid/96 offered Friday from Thursday's 93 bid/94 close, boosted by a report in the Financial Times that another big wireless carrier, Cingular Wireless - Number-Two in the industry - may be a possible suitor. The FT said that Cingular's chief executive officer, Stephen Carter, "hinted in an interview" on Thursday that he would welcome a merger with VoiceStream, although he refused to comment directly on a possible deal. The paper quoted people close to the situation as having said that that Cingular had made overtures to DT in the past about a merger with VoiceStream but had been rebuffed.

It should be noted that other so far unverified telecom consolidation rumors making the markets recently had Cingular hooking up with Number 3 player AT&T Wireless, VoiceStream's supposed erstwhile suitor.

A trader noted that not many high yield accounts still dabble in VoiceStream, given the investment-grade status of its corporate parent. From where he sat, "it looks like it's more of a high-grade situation. Not too many of the guys we talk to play in it."

Elsewhere in the telecom sphere, there was little activity Friday in Qwest Communications International Inc., whose bonds had swooned on Wednesday and had gone a bit further downward on Thursday in the wake of the Denver-based regional Bell operating company's mid-week announcement that federal prosecutors in Denver are investigating the troubled telecommunications operator for possible criminal violations, on top of the ongoing Securities and Exchange Commission probe of its accounting tactics.

The Qwest holding company bonds were seen mostly unchanged Friday around the same 40-41 bid level to which they had eased Thursday, after having plummeted over ten points on Wednesday.

Late in the day, The Wall Street Journal reported on its website that Qwest was considering restating the company's 2001 financial results, which would amount to "erasing more than $1 billion in revenue in a bold but potentially risky bid to restore the company's damaged credibility." The WSJ attributed the information to people familiar with the matter, and said the company had declined comment.

It further said that while recently installed CEO Richard Notebaert had not yet made a final decision on the restatement," but analysts believe a restatement is likely, and that Qwest could trim projections for the remainder of 2002.

The story, a trader noted, hit the market after the day's activity had already wound down, but opined that "I would expect that the news would not be received well [on Monday] and would lead to a negative opening for Qwest."

And speaking of negatives, market-watchers noted another weekly outflow from high yield mutual funds - the fifth consecutive week in which more money has left those funds than has come into them. The weekly numbers, issued by AMG Data Services, are regarded by many in the market as a useful gauge of overall market liquidity trends. In the week ended Wednesday, outflows from funds which report on a weekly basis totaled $149.8 million, excluding distributions. That outflow comes on the heels of a $213.174 million outflow in the week ended July 3, and it lowered the total cumulative net inflow so far this year to $4.127 billion, according to a Prospect News analysis of the AMG data. While the funds flow number still remains positive and weekly inflows have outnumbered outflows 18-10 in the 28 weeks since the start of the year, the trend recently has turned decidedly negative. The cumulative total has fallen by some $1.5 billion from the year's peak total of $5.65 billion, seen back in mid-May, with over $1.3 billion of that erosion seen in the last five weeks alone.

The latest funds-flow numbers "was nothing too major," a trader said, "but it continues to go down. You can see new issuances are almost zero - we had just one [dollar-denominated U.S. -based issue] this past week" - the $305 million offering of 10% first mortgage notes due 2009 from Oregon Steel Mills Inc.

"The market is not very receptive," he continued. "We'll see how that pans out in the next week." Noting the pounding stocks have recently taken, including on Friday, he warned that "this generally doesn't bode too well for the overall tone of the market. It's really difficult."

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