Nextlink Gets Major Cash Infusion

High yield issuer Nextlink Communications Inc. got an $850 million boost last week from Forstmann Little & Co. in return for an 8% stake in the telecom company as well as two seats on the board of directors.

Nextlink's stock rose about 12% on the news to $62.75 a share and although the bonds have been fairly flat so far, two analysts said last week that they believe the bonds will follow the stock and also see a price increase in the near future.

The transaction, which should be complete early next year, followed a deal the previous day in which Nextlink will buy the 50% stake of Internext LLC that it doesn't already own from Eagle River Investments for $220 million in stock.

Together, the two transactions put Nextlink in a strong liquidity position, Chief Executive Officer Dan Akerson said in a conference call. It also gives Nextlink enough funding for the next two years, he said.

Forstmann, for its part, has shown a strong interest in the competitive local exchange carrier sector. In addition to the deal last week, it also invested $1 billion in McLeod USA Inc. for a 12% stake earlier in the fall. (HYR 09/06/99).

Nextlink, like many other telecom firms, has been on a tear to build and acquire capacity. The company, which focuses on small and medium-sized businesses, spent nearly $1 billion so far this year on acquisition and investments in equipment.