Nextel drops slightly from Wednesday's highs; Xerox feels little impact on renegotiation news

By Sara Rosenberg

New York, April 18 - Bank loan paper remained at relatively consistent levels in the secondary Thursday, according to market sources. Nextel Communications dropped slightly after gaining a few points in the previous day's trading. Xerox Corp., which has received a lot of media attention lately, did not really see a change in price as professionals and investors were anticipating news on the renegotiation of its revolving credit facility,

Nextel Communications "lost a little steam" in secondary trading, according to a financial professional, due to the saturation of the market with the company's paper. Nextel currently has about $6 billion of loans in the market, with about $2.8 billion of it in an institutional tranche.

"People probably want to buy it but they are full of paper," the professional said.

On Thursday, the paper traded at 85¼ compared to Wednesday's level of 861/4, the trader said. The Reston, Va. digital wireless communications company gained a couple of points during trading hours on Wednesday in response to favorable first quarter earnings news. Financial results for first quarter 2002, included domestic revenues up 22% over last year's first quarter to $1.96 billion and a 66% increase in domestic operating cash flow to $586 million, before a restructuring charge, compared to $353 million in last year's first quarter.

Xerox Corp. traded at basically the same price of 94 to 94.5 as it has been recently despite news of ongoing negotiations regarding the refinancing of its $7 billion revolver. The Stamford, Conn. document management company announced Thursday that negotiations should be completed by the end of June - although it also warned in a Securities and Exchange Commission filing Wednesday it may be in default if it is not successful. The renegotiated revolver would be used to repay a portion of the current loan and refinance the remaining portion.

"It's a little softer than it was a few weeks ago," a trader said. He explained that the paper did not show any dramatic changes in pricing on Thursday because people were expecting news of the negotiations with the 57 banks.

Standard & Poor's, however, announced that it placed Xerox Corp.'s ratings on CreditWatch with negative implications due to concerns about the renegotiation of its $7 billion revolver due Oct. 2002. S&P plans on monitoring the progress of the bank negotiations before reviewing the ratings, according to a S&P release.

In primary activity, National Dairy Holdings' recently launched $425 million credit facility is said to be in high demand. According to the syndicate, the pro rata portion is oversubscribed and the B portion is more than four times oversubscribed. Wachovia is the sole lead arranger and administrative agent for the deal.

The Texas milk producing company's loan consists a $125 million six-year that has an interest rate of Libor plus 225 basis points and a commitment fee of 50 basis points, a $125 million six-year term A that has an interest rate of Libor plus 225 basis points and a $175 million seven-year term that has an interest rate of Libor plus 275 basis points.

According to the syndicate, commitments are supposed to be due by April 25 but since the deal is doing so well the account may not be left open that much longer.

With such a positive reception, there is a chance that interest rates may be lowered on the loan, however, according to the syndicate, flexing down has not been discussed at this point.

In other primary news, Russell Corp. announced the closing of its $325 million senior secured credit facility (Ba2/BB+) from Fleet Capital. Fleet Securities acted as lead arranger for the deal.

The Atlanta, Ga. apparel company's restructured loan consists of a $300 million five-year revolver with an interest rate of Libor plus 250 basis points and a $25 million five-year term tranche with an interest rate of Libor plus 300 basis points. The commitment fee is 50 basis points on the revolver.

Proceeds were used towards refinancing existing debt and for general corporate purposes.

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