Toronto Dominion and Bank of Boston Corp. are lining up a $350 million loan for Metrocall Inc., the first financing for a paging company since a rival, Mobile Media, violated its loan covenants early this month.
The banks launched the deal last Wednesday for the Alexandria, Va.-based Metrocall, which is looking to a cautious bank market to support its approximately $341 million cash and stock aquisition of A+ Network Inc.
"Any time you have smoke in the market, the syndication process can be more challenging," said Paula Lang, a senior vice president and lender at Fleet Financial Group.
Much of that smoke came from Mobile Media. The company has had a difficult time integrating the operations of MobileComm, which it acquired from Bell South in January.
Mobile Media missed a bond payment several weeks ago, and is currently in negotiations with a steering committee that includes Chase Manhattan Corp., its lead bank, to restructure its loan.
That, coupled with competition from new ventures like wireless communications, has put the paging business under some pressure.
"Right now, paging is somewhat out of favor," said a banker who was not participating in this deal. "There are a lot of concerns about whether the multiples are too high for these companies."
Other analysts and bankers, however, said that Mobile Media's problems were unlikely to impact the syndication of the Metrocall loan.
For one thing, Metrocall's fundamentals are strong enough to help the market discriminate between it and weaker rivals, Ms. Lang said. "The market should look at Metrocall's recent performance, its license, its position nationwide, and its strategic arrangements."
"Mobile Media's problems are unique to Mobile Media," added Amy Miller, the head of loan syndications at Toronto Dominion. Metrocall, on the other hand, "has a conservative capital structure and a strong management team, and is well-positioned to compete."
The company received a boost from another market last Friday, when it sold $40 million in private equity to SunAmerica Inc., John Hancock Mutual Life and UBS Capital.
Toronto Dominion and Bank of Boston are equally underwriting the loan. Less than a week after the bank meeting, Fleet Financial, First Union Corp., and Royal Bank of Canada had stepped up with $40 million for coagency commitments.
Paul Liberty, a vice president at Metrocall, said concerns about the paging business have come and gone before.
"When cellular technology was first hitting the street, everyone said paging was dead," Mr. Liberty said. "Well, we're celebrating the 15th year anniversary of the death of paging, and we aren't going anywhere."
Mr. Liberty maintained that paging is the cheapest wireless technology available to a consumer in the business market.
Meanwhile, Chase Manhattan, Bank of New York Corp., and Societe Generale are expected to begin syndication today on a $420 million loan for American Personal Communications Inc.
The deal will refinance some debt for the wireless communications joint venture between Sprint Spectrum and the Schelle family.
The loan, expected to be launched today in midtown Manhattan, is divided into a revolving credit and a term loan, both of which have eight-year Maturities