Nextel, Allied Waste, Charter, AES head north during secondary trading

By Sara Rosenberg

New York, Oct. 31 - It was a good day in the secondary bank loan market for names like Nextel Communications Inc. and Allied Waste Industries Inc. as they continued to strengthen. Charter Communications Inc. joined the party as well, with its debt moving up slightly after over a week of losses. And, lastly AES Corp. jumped up a few points as investors gained confidence in the company's ability to complete its tender offer.

Nextel Communications Inc. continued to move up on Thursday with the term loan B and the term loan C trading around 891/2, which is about 100 basis points higher than the paper was trading on Wednesday, according to a trader.

Asked why the Reston, Va. wireless company's paper experienced this strengthening, the trader responded: "There are a lot of retail buyers of the paper."

Allied Waste Industries Inc. also continued its upward momentum with trades around 96 7/8, up about 75 basis points from Wednesday's trading level, according to the trader.

The Scottsdale, Ariz. solid waste management company released "good numbers" on Wednesday with EBITDA of $456.4 million on revenues of $1.413 billion for the third quarter. Net income was 19 cents per share, including an after-tax extraordinary charge of 4c per share related to the write-off of deferred financing costs associated with the early extinguishment of debt, as well as an after-tax charge of 5c per share, related to the interest rate swap contracts that the company de-designated at the end of 2001. Earnings for the quarter were 28c per share, compared to analyst estimates of 27c per share. Free cash flow was $241.5 million and debt was reduced by $271.2 million to $8.979 billion at Sept. 30.

"The strong cash flow and effective cash management in the third quarter fueled the earlier-than-anticipated achievement of our year end debt goal of $9 billion," said Tom Van Weelden, chairman and chief executive officer, in a news release. "As we stated recently, we now expect to reduce our debt level to below $8.950 billion by the end of 2002. We are very pleased that we continue to generate approximately 32% EBITDA margins and exceed our cash flow goals despite economic conditions that remain challenging. We expect to achieve our target of reporting full-year EBITDA of approximately $1.75 billion."

Charter Communications Inc. was also a bit stronger at 80 bid, 83 offered, the trader said. The loan dropped last week as investors showed their dislike for the company's earnings forecast and management change. On Tuesday, the St. Louis cable company's loan was quoted with a bid/offer of 80/81. On Monday, the loan's bid dropped into the mid-70s and then rebounded to 791/2, following Moody's Investors Services' downgrade of the company's and its subsidiaries' debt ratings.

"It was overdone on the downside. It traded as low as 79," the trader explained. "[Now], it's headed back up."

AES Corp.'s bank debt was "up several points" with quotes in the low 80s following news of a brief extension on the tender offer to a Nov. 1 deadline from an Oct. 30 deadline, according to a trader. "People think it will get done now," the trader added.

The company announced earlier this month an exchange offer for AES' $300 million 8.75% senior notes due 2002 and $200 million 7.375% remarketable and redeemable securities (ROARS) due 2013 which are putable in 2003.

In addition to the tender offer, the Arlington, Va. power company is in the process of obtaining a $1.6125 billion credit facility (B2/BB) via Citibank. The loan consists of a $500 million revolver, a $75 million letter of credit facility, a $350 million term A, a $425 million term B and a $262.5 million term C. All tranches are due July 2005 and are priced at Libor plus 375 basis points.

The facility will replace existing facilities maturing over the next 12 months and the exchange offer will wipe out the notes that are due to mature later this year or are putable in 2003.

Both the credit facility and the tender offer are co-dependant on each other in order to be completed.

Levi Strauss & Co. held an update meeting on Thursday, which was viewed as "positive" by market sources. The presentation covered the company's prospects as well as refinancing plans for next year's maturities which Levi Strauss expects to have in place in the first quarter (see related story on page 1 of this issue).

The apparel company's term B was quoted around par on Thursday, which, according to a trader, is consistent with the previous level.

However, the company's high-yield bonds were cited as one of the best performers in the high yield market earlier this week, with the 11 5/8% notes moving to 93.75 bid/94.75 offered, having firmed more than 10 points in the past week and a half.

In primary news, Rexnord held a bank meeting for its $435 million credit facility that "went well", according to market sources. Deutsche Bank and Credit Suisse First Boston were the lead banks on the deal.

The loan consists of a $75 million six-year revolver with an interest rate of Libor plus 350 basis points and a $360 million term loan B with an interest rate of Libor plus 400 basis points.

Upfront fees are 25 basis points on the term loan and 75 basis points on the revolver, according to market sources.

The company's total leverage is 4.5 times and senior leverage is 2¾ times.

Proceeds will be used to help fund Rexnord's leveraged buyout by The Carlyle Group.

Rexnord is a supplier of power transmission components, drives and conveying equipment.

Scientific Games Corp.'s announcement on Thursday regarding potential employee wrongdoing is seen as potentially having a relatively small affect on the company's proposed credit facility, according to market sources.

The company reported that during the course of its internal investigation into the Arlington Park Breeders' Cup Pick Six winner it uncovered evidence of potential employee wrongdoing at Autotote, a subsidiary of Scientific Games. The evidence was turned over to the New York State Racing and Wagering Board as well as the New York State police.

"As a result of our ongoing investigation to date, we have terminated one employee whose identity along with other relevant information has been turned over to the authorities," said Lorne Weil, chairman and chief executive officer, in a news release. "We are taking all necessary steps to resolve this matter as quickly as possible, and will continue to keep all authorities fully informed."

The company recently launched a $360 million credit facility consisting of an $85 million five-year revolver with an interest rate of Libor plus 275 basis points and a $275 million six-year term loan with an interest rate of Libor plus 325 basis points. Bear Stearns is the lead bank on the deal.

Proceeds will be used to refinance existing debt.

Scientific Games is a New York, N.Y. provider of services, systems and products for instant-ticket lotteries and pari-mutuel wagering.

"Last thing I heard, the facility was getting done reasonably well," a market professional told Prospect News. "If it doesn't impact the financial reporting of the company itself than probably the implications are pretty small for Autotote as well.

"This market is so quirky right now [though]," he continued. "It's not good news but it's probably something they can weather. Autotote turned it up, reported it to the authorities, what else are they supposed to do?"

Aerostructures Corp.'s $130 million six-year term B (B1/BB-) was flexed up once again, according to market sources, this time by 25 basis points to Libor plus 425 basis points. Previously the loan was flexed up from 350 basis points to 400 basis points.

Lehman Brothers is the lead bank on the Nashville, Tenn. supplier of airframe structures' refinancing deal.

Sierra Pacific Power Co. closed on its $100 million three- year term loan. Lehman Brothers was lead bank on that loan as well.

Furthermore, the Reno, Nev. electric utility company has entered into an accounts receivables purchase facility of up to $75 million as a back-up liquidity facility.

Security is a general and refunding mortgage bond, Series C, issued under the company's General and Refunding Mortgage Indenture.

Proceeds from the financing, along with cash on hand, will be used to pay off $150 million in maturing bank debt.

"We are very pleased with the progress we have made in improving our balance sheet and overall financial strength," said Walt Higgins, chairman, president and chief executive officer of Sierra Pacific Resources, parent company of Sierra Pacific Power, in a news release.

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