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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 12, 1998 (February 11, 1998)
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NEXTEL COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-19656 36-3939651
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
1505 FARM CREDIT DRIVE, MCLEAN, VA 22102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 394-3000
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
Preferred Stock Offering. On February 11, 1998, Nextel Communications, Inc.
("Nextel" or the "Company") completed the sale of 750,000 shares of 11.125%
Series E Exchangeable Preferred Stock (the "Preferred Stock") with a
liquidation preference of $1,000 per share generating approximately $727.9
million in net proceeds. Dividends on the Preferred Stock accrue at an annual
rate of 11.125% of the liquidation preference, are cumulative from the date of
issuance and are payable quarterly in cash or, on or prior to February 15,
2003, at the sole option of Nextel, in additional shares of Preferred Stock.
The Preferred Stock is mandatorily redeemable on February 15, 2010 at the
liquidation preference plus accrued and unpaid dividends, and is redeemable in
whole or part, at the option of Nextel, at any time after December 15, 2005, at
a price equal to the liquidation preference plus accrued and unpaid dividends,
and, in certain circumstances, after February 15, 2003 at specified redemption
prices. Additionally, in certain circumstances, up to 35% of the outstanding
Preferred Stock may be redeemed on or prior to February 15, 2001 at the option
of Nextel, at 111.125% of the liquidation preference plus accrued and unpaid
dividends from the proceeds of one or more sales of Nextel's Class A Common
Stock, par value $.001, per share ("Nextel Common Stock") provided that such
redemption occurs within 180 days after the consummation of any such sale. The
Preferred Stock is exchangeable, in whole but not in part, at the option of
Nextel at any time after December 15, 2005, and in certain circumstances
sooner, into Nextel subordinated debentures.
The shares of the Preferred Stock were issued in a private placement
transaction, have not been registered with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933 (the "Securities
Act") and may not be sold absent registration or an applicable exemption from
the registration requirements. In connection with the issuance of the
Preferred Stock, Nextel has agreed to use its best effort to file with the
Commission and cause to become effective a registration statement with respect
to a registered offer to exchange the then outstanding Preferred Stock for an
equal number of shares of 11.125% Series E Exchangeable Preferred Stock that
have been registered pursuant to the Securities Act (the "Preferred Stock
Exchange Offer"). In the event that the Preferred Stock Exchange Offer is not
consummated prior to the specified dates, the dividend accrual rate applicable
to the Preferred Stock will increase by specified amounts until the Preferred
Stock Exchange Offer is consummated or certain other requirements are met.
Terms of the Preferred Stock are set forth in the Certificate of
Designation attached to this Current Report as Exhibit 4.1 which is
incorporated herein by reference, and the description of the terms of the
Preferred Stock included herein is qualified by reference to such Certificate
of Designation.
Senior Notes Offering. Concurrent with the sale of the Preferred Stock, Nextel
completed the sale of $1,627 million principal amount at maturity of Senior
Serial Redeemable Discount Notes due 2008 (the "Senior Notes"). The issue
price of the Senior Notes, which mature on February 15, 2008, was $614.71 per
$1,000 principal amount at maturity (generating approximately $975.9 million
in net proceeds) representing a yield to maturity of 9.95% computed on a
semi-annual bond equivalent basis from the date of issuance. Cash interest
will not accrue on the Senior Notes prior to February 15, 2003, and will be
payable on February 15 and August 15 of each year commencing August 15, 2003,
at a rate of 9.95% per annum. The Senior Notes are redeemable at the option of
Nextel, in whole or in part, at any time, on or after February 15, 2003, at
specified redemption prices plus accrued and unpaid interest. In addition, in
the event of one or more sales by Nextel prior to February 15, 2001 of at least
$125 million of its
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capital stock, Nextel may redeem up to a maximum of 35% of the aggregate
accreted value of the outstanding Senior Notes at a redemption price equal to
109.95% of such accreted value on the date of redemption; provided that such
redemption occurs within 180 days after the consummation of any such sale. The
Senior Notes are senior unsecured indebtedness of Nextel and rank pari passu in
right of payment with all unsubordinated, unsecured indebtedness of Nextel
(including Nextel's five outstanding issues of Senior Redeemable Discount Notes,
in effect prior to 1997 (the "Old Senior Notes"), and the notes issued in
October 1997 and September 1997 (the "1997 Senior Notes," and collectively with
the Old Senior Notes, the "Nextel Notes") and will be senior in right of payment
to all subordinated indebtedness of Nextel.
The Senior Notes were issued in a private placement transaction and have
not been registered with the Commission under the Securities Act and may not be
sold absent registration or an applicable exemption from the registration
requirements. In connection with the issuance of the Senior Notes, Nextel has
agreed to use its best efforts to file with the Commission and cause to become
effective a registration statement with respect to a registered offer to
exchange the then outstanding Senior Notes for Senior Notes of equal value that
have been registered pursuant to the Securities Act (the "Senior Notes Exchange
Offer"). In the event that the Senior Notes Exchange Offer is not consummated
prior to the specified dates, additional incremental interest on the accreted
value of the Senior Notes will accrue until the Senior Notes Exchange Offer is
consummated or certain other requirements are met.
Terms of the Senior Notes are set forth in the Indenture attached to this
Current Report as Exhibit 4.2 which is incorporated herein by reference, and
the description of the terms of the Senior Notes included herein is qualified
by reference to such Indenture.
Update to February 2, 1998 Current Report. Nextel filed a Current Report on
Form 8-K with the Commission on February 2, 1998, (the "February 2 Report"),
which assumed that Nextel would receive $1,300 million in gross proceeds from
the offering of the Preferred Stock and Senior Notes. The actual amount of
gross proceeds received from the sale of such securities was $1,750 million, an
increase of $450 million. Accordingly, the following table restates the table
and footnotes, following the second paragraph set forth under the caption
"Financing Plan; Proposed Preferred Stock and Senior Notes Offerings; Use of
Proceeds" in the February 2 Report, in its entirety. (Capitalized terms used
herein but not defined herein shall have the meanings ascribed to them in the
February 2 Report).
SOURCES USES
(in millions) (in millions)
Gross proceeds from the Repayment of 11.5% Senior
offerings of the Preferred Stock Redeemable Discount Notes
and the Senior Notes................... $1,750 due 2003............................. $ 319(3)
Bank Credit Facility.................... 756(1) Repayment of 12.25% Senior
Additional Bank Borrowings.............. 0(1) Redeemable Discount
New Option Proceeds..................... 420(2) Notes due 2004....................... 327(3)
Available cash, cash equivalents Digital system capital
and marketable securities in expenditures......................... 1,335
restricted companies at Non-system capital expenditures,
December 31, 1997...................... 44 operating losses, fees, expenses
------ and other corporate purposes......... 989
Total: $2,970 -------
Total: $ 2,970
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(1) Gives effect to an assumed repayment of borrowings under the Company's
Vendor Credit Facility and to the assumed repurchase or redemption of the
Targeted Notes. The amount remaining available for borrowing under the Bank
Credit Facility, assuming implementation of the Additional Bank Borrowings,
would total approximately $1,070.5 million. Until the Targeted Notes have been
purchased, redeemed or otherwise refinanced, a portion of such borrowing
availability may not be accessible. See, "Certain Financing Risks Associated
With The 1998 Plan" below.
(2) Represents $420.0 million in proceeds (the "New Option Proceeds") from the
assumed exercise of an option for cash to purchase at any time through July 28,
1998, shares of Common Stock at prices ranging from $16.00 to $18.00 per share
(the "New Option") held by an affiliate of Craig O. McCaw.
(3) Accreted value at December 31, 1997 after giving effect to open market
repurchases in 1997.
The receipt of the additional proceeds of the sale of the Preferred Stock
and the higher indebtedness levels resulting from the increase in gross
proceeds received from the sale of the Senior Notes also affect the
availability of financing under the terms of the Old Indentures described in
the February 2 Report. The following paragraph revises and restates the
disclosure in the fourth paragraph under the heading "Certain Financing Risks
Associated With The 1998 Plan" in the February 2 Report in its entirety to
reflect the receipt of the additional proceeds from the sale of the Preferred
Stock. (Capitalized terms used herein but not defined herein shall have the
meanings ascribed to them in the February 2 Report).
The availability of all of the above-described existing and contemplated
additional financing is subject to Nextel's satisfying certain requirements
under the Old Indentures, which require Nextel to issue new equity for cash as
a condition to obtaining access to all amounts not constituting "permitted
debt" (as such term is defined in the Old Indentures) under the Bank Credit
Facility (including any modifications thereto to implement the additional bank
borrowings), the Vendor Credit Facility and the Second Vendor Financing
Agreement. The Company's (i) receipt of approximately $727.9 million in net
proceeds from the offering of the Preferred Stock, (ii) the receipt in July
1997 of approximately $482.0 million in proceeds from the offering of the 13%
Series D Exchangeable Preferred Stock (the "Series D Preferred Stock
Proceeds"), and (iii) the net proceeds received from issuances of qualifying
equity, including from the exercise of certain options and warrants, after June
1, 1997 (the "Exercise Proceeds") would enable the Company, pursuant to the
debt incurrence formulas set forth in the Old Indentures, to incur
approximately $2.7 billion in indebtedness (classified as incurrence debt).
Such incurrence debt, combined with additional amounts constituting "permitted
debt" under such Old Indentures, represents a combined amount of approximately
$4.6 billion in debt that the Company may incur in compliance with the Old
Indentures in addition to the outstanding debt evidenced by the Old Senior
Notes (and any other outstanding debt incurred to refinance any of such Old
Senior Notes). As of December 31, 1997, approximately $920.0 million in debt
constituting incurrence debt had been incurred by the Company. Based solely on
the additional debt incurrence capacity associated with the Company's receipt
of net proceeds from the offering of the Preferred Stock, Series D Preferred
Stock Proceeds, and the Exercise Proceeds, and assuming that the modifications
to the Bank Credit Facility relating to the Additional Bank Borrowings are
implemented, the issuance of the Senior Notes will have the effect of
restricting the Company's ability to access, on approximately a dollar for
dollar basis (to the extent the Company receives gross proceeds from the
issuance of Senior Notes in excess of approximately $725.0 million), the amount
of the Additional Bank Borrowings that would be available until either (i) the
proceeds from the issuance of the Senior Notes are applied to refinance the
Targeted Notes or other Old Senior Notes in accordance with the Old Indentures
(in which case, to the extent the
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proceeds received from the issuance of the Senior Notes are applied to effect
such refinancing, such Senior Notes would constitute "permitted debt" under the
Old Indentures that would not reduce the amount of Additional Bank Borrowings
available) or (ii) the Company issues additional equity for cash that would
support additional incurrence debt. That portion of the proceeds from the
issuance of the Senior Notes that is not applied to repurchase, redeem or
otherwise refinance Targeted Notes or other Old Senior Notes may be utilized to
meet the Company's funding requirements for the implementation of its 1998 Plan
and therefore may replace a portion of the Additional Bank Borrowings, to the
extent the Company's ability to incur such borrowings is limited by the Old
Indentures.
The remaining disclosures contained in the February 2 Report remain
unchanged.
Forward Looking Statements. "SAFE HARBOR" STATEMENT UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995: A number of the matters and subject
areas discussed in this Current Report that are not historical or current facts
deal with potential future circumstances and developments. The discussion of
such matters and subject areas is qualified by the inherent risks and
uncertainties surrounding future expectations generally, and also may
materially differ from Nextel's actual future experience involving any one or
more of such matters and subject areas. Nextel has attempted to identify, in
context, certain of the factors that it currently believes may cause actual
future experience and results to differ from Nextel's current expectations
regarding the relevant matter or subject area. The operation and results of
Nextel's wireless communications business also may be subject to the effect of
other risks and uncertainties in addition to the relevant qualifying factors
identified elsewhere in this Current Report, including, but not limited to,
general economic conditions in the geographic areas and occupational market
segments that Nextel is targeting for its Digital Mobile network service, the
availability of adequate quantities of system infrastructure and subscriber
equipment and components to meet Nextel's service deployment and marketing
plans and customer demand, the success of efforts to improve and satisfactorily
address any issues relating to Digital Mobile network performance, the
continued successful performance of the Reconfigured iDEN technology being
deployed in the Company's various market areas, the ability to achieve market
penetration and average subscriber revenue levels sufficient to provide
financial viability to the Company's Digital Mobile network business, Nextel's
ability to timely and successfully accomplish required scale-up of its billing,
collection, customer care and similar back-room operations to keep pace with
customer growth, increased system usage rates and, growth in levels of
accounts receivable being generated by the Digital Mobile Network customer
base, access to sufficient debt or equity capital to meet Nextel's operating
and financing needs, the quality and price of similar or comparable wireless
communications services offered or to be offered by Nextel's competitors,
including providers of cellular and PCS service, future legislative or
regulatory actions relating to SMR services, other wireless communications
services or telecommunications generally and other risks and uncertainties
described from time to time in Nextel's reports filed with the Commission,
including the Annual Report on Form 10-K for the fiscal year ended December 31,
1996 and the Quarterly Report on Form 10-Q for the quarters ended March 31,
1997, June 30, 1997 and September 30, 1997.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Not applicable.
(b) PRO FORMA FINANCIAL INFORMATION.
Not applicable.
(c) EXHIBITS.
Exhibit No. Exhibit Description
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4.1 Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights of
11.125% Series E Exchangeable Preferred Stock and Qualifications,
Limitations and Restrictions Thereof.
4.2 Indenture, dated as of February 11, 1998, between Nextel
Communications, Inc. and Harris Trust and Savings Bank, as Trustee,
relating to Nextel's Senior Serial Redeemable Discount Notes due 2008.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NEXTEL COMMUNICATIONS, INC.
Date: February 12, 1998
By:/s/Thomas J. Sidman
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Thomas J. Sidman
Vice President and General Counsel
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EXHIBITS
Exhibit No. Exhibit Description
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4.1 Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights of
11.125% Series E Exchangeable Preferred Stock and Qualifications,
Limitations and Restrictions Thereof.
4.2 Indenture, dated as of February 11, 1998, between Nextel
Communications, Inc. and Harris Trust and Savings Bank, as Trustee,
relating to Nextel's Senior Serial Redeemable Discount Notes due 2008.
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