Year's First Big Wireless Syndication

BankAmerica Corp. and four other banks are set to begin syndication today of a $600 million senior bank loan for Northern Telecom.

The loan, to be launched at a bank meeting in Kansas City, Mo., is equally underwritten by BankAmerica, Bank of Nova Scotia, Barclays de Zoete Wedd, J.P. Morgan & Co., and Royal Bank of Canada. It is part of a $1.2 billion vendor financing that will help Northern Telecom provide equipment for Sprint Spectrum, the closely watched wireless communications joint venture of Sprint Corp., Cox Communications, Comcast Cable, and Telecommunications Inc.

The deal marks the first time in 1997 that a wireless communications company will tap the bank market for a sizable financing. It is also the first Sprint Spectrum-related deal to come to the market after Chase Manhattan Corp. led a hotly contested $2 billion loan for the joint venture.

Those two factors ensure that the Northern Telecom deal will be closely watched by other wireless companies, such as Omnipoint and PCS Primeco, which are said to be mulling a debut in the senior loan market.

Last year was an active and memorable year for the sector, when wireless companies tapped banks for some $3.6 billion in financing.

One of the year's most closely watched transactions was Chase's loan for Sprint Spectrum. The deal encountered some market resistance after Chase won the loan away from Citicorp, J.P. Morgan & Co. and Toronto Dominion, who had been working on putting together a financing package for almost a year.

Chase eventually sold down its fully underwritten position by putting together a syndicate of international and domestic banks.

The newer loan is backed by the same receivables as the original Chase transaction. But bankers said it is coming to the market at a time when Sprint Spectrum has already started operating in eight areas.

Additionally, the current deal has a slightly different structure from last year's Sprint Spectrum loan and does not include a sizable institutional portion.

The $600 million bank loan is priced at the London interbank offered rate plus 300 basis points, as compared with 250 basis points on the larger Chase-led loan.

"It's effectively the same credit risk, and it's priced higher," said a syndicated lender. "We wanted to say no to Sprint Spectrum originally and yes to this, and that's what we intend to do."

Approximately 60 banks have been invited to participate in the nine-year amortizing loan.

Bankers will have plenty of opportunity to balance their exposure to Sprint Spectrum debt. The company is expected to require approximately $9 billion in financing by 1998 to develop a network of personal communication services. That figure includes a similarly sizable vendor financing for Lucent Technologies as well.

Some bankers said they were not surprised at the identity of the bank group and, more specifically, that Chase was not among the lead lenders.

"This is a Northern Telecom deal," said one banker. "Nortel has its own allegiances that they'd like to keep."

The portion of the vendor financing that the banks are not providing is being held by the Export Development Corporation of Canada, Northern Telecom, and NTFC Capital Corp.

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