NEW YORK-Standard & Poor’s Corp. assigned a speculative grade rating of B- to a new, $500 million debt issue that Nextel Communications Inc. sold in a private placement.
Nextel will use proceeds of the eight-year, convertible senior note issue to fund capital expenditures, investments, working capital needs and general corporate purposes.
Total debt outstanding for Nextel’s domestic operations is about $6.7 billion and for Nextel International, about $1.3 billion.
“To accommodate higher future growth in subscribers and higher system usage, capital expenditures are expected to be about $1.8 billion for domestic operations in 1999,” Rosemarie Kalinowski, an S&P telecommunications analyst, said in her rating report.
“Proceeds from this note issue, together with recent asset sales, the $600 million Microsoft (Corp.) investment and the prospective stock options exercised by Craig McCaw are expected to be sufficient to fund capital requirements through 2000 …
“Near-term capital requirements should also be mitigated as a result of Nextel Partners Inc., owned 35 percent by Nextel (Communications). [It] is a newly formed corporation established to build out the Nextel network in small- and mid-size markets.”
Nextel’s popular “Direct Connect” service for industry user groups has resulted in a doubling of the enhanced specialized mobile radio operator’s domestic subscriber base to more than 3 million during the past year, Kalinowski said. Monthly average revenue per subscriber is in the $60 to $70 range, and churn averages about 2 percent.
“Standard & Poor’s expects the company to be free cash flow positive for domestic operations in 2001,” she said.
