NEW YORK-A recent decision by Nextel Communications Inc. to seek $1.55 billion in secured bank loans for the nationwide rollout of its digital specialized mobile radio network has prompted Moody’s Investors’s Service to consider downgrading more than $1.65 billion in outstanding Nextel public debt securities.
In announcing its review decision late Friday, the New York-based debt rating agency expressed concern that the secured bank financing sought by Nextel would take repayment priority over outstanding notes issued earlier by the company, especially debt not secured by any collateral. Under consideration for possible reduction is the already speculative grade B3 rating Moody’s has accorded to two debt issues: $1.13 million in senior redeemable discount notes due 2004 and $526 million in senior unsecured notes due 2003.
“The review will focus on changes in the level of structural subordination incurred by the senior unsecured note holders as a result of the secured bank financing,” said a Moody’s announcement issued by James Parrish, managing director, and Eric Goldstein, senior analyst, both in the Speculative Grade Ratings Group. “The review will also consider the enhanced liquidity position of the company due to the additional financing, as well as the potential long-term impact on the credit worthiness of the company from its national expansion plans.”
Nextel, headquartered in McLean, Va., is a leading provider of integrated wireless communications services targeted primarily at businesses. As of June 30, it had 809,000 analog SMR units and 176,000 digital units in service. For the six months ending June 30, Nextel reported revenues of $146 million and a net loss of $249 million.
