2000 Excellence Awards: Steven Shindler

Keeping Nextel Communications flush with cash has produced spectacular results.
Ian SpringsteelOctober 1, 2000

When Steven Shindler joined Nextel Communications Inc. in 1996, he knew he had a lot to learn. The wireless company, based in Reston, Virginia, was racing to build its technology, management team, and, above all, coffers. And while Shindler, a 10-year banking veteran, had lent to the wireless industry, he had no operational experience, no controllership or accounting background, and had never served as a financial officer at any company.

Still, the one thing he did understand was how to raise money, and from the start, Shindler’s key responsibility was to add fuel to Nextel’s ever-demanding engine. And since taking the CFO seat at the behest of leading shareholder Craig McCaw and former CEO Dan Akerson, he has pursued that mission with a vengeance.

In fact, since 1996, the company has secured approximately $20.5 billion in new funding commitments in more than 31 different financings. Last year alone, Shindler helped Nextel land $8.7 billion in 10 separate transactions, and already this year, Nextel has raised $2.8 billion from just 3 transactions, and laid plans to spin off its overseas arm, Nextel International, when conditions are right. Little wonder, then, that as a result of all this activity, Nextel has seen its market capitalization grow from $5.6 billion in June 1996 to $55.3 billion on June 30, 2000. Or that for his efforts Shindler has earned this year’s CFO Excellence Award in the Capital Structure Management category.

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“Steve was very green in terms of operating experience when we hired him, but the first thing Nextel needed was money, and he knew how to access the markets and he understood the wireless industry. So we rolled the dice,” says Timothy Donahue, then Nextel’s chief operating officer and today its CEO and president. “I give him an enormous amount of credit for how much he’s learned and what a fantastic job he’s done for the company.”

No Stone Unturned

Shindler, in fact, has left no stone unturned in his search for new capital. “When I joined, Nextel relied more on equity than debt to purchase radio spectrum,” he reflects. “It wasn’t the most efficient use of shareholders’ capital.” So in the past several years, the former Toronto Dominion banker has “layered in a lot of different structures to create more balance between debt and equity.”

That’s putting it mildly. Since Shindler’s arrival, Nextel has repeatedly tapped the high- yield market with sizable issues; become a familiar visitor to the convertible market; executed private placements, spin-offs, and sale- leasebacks; and last fall raised a whopping $2.8 billion in a single issue of common equity. “Some CFOs will stay away from complexity in transactions and the balance sheet, but Steve embraces it if it will save the company any money and help the capital structure,” says Barry Kaplan, wireless analyst at Goldman Sachs & Co.

Truly, it is Shindler’s acumen for raising money in difficult circumstances that has made him so valuable. While raising money wasn’t terribly difficult in 1997 or early 1998, things changed dramatically during the international financial crisis in the fall of 1998. At that time, the junk well dried up just as the company needed cash for acquisitions and capital expenditures. Surveying the less- skittish segments of the market, Shindler found $300 million in private commitments, and placed a 144A deal that November at a spread that wasn’t usurious, given the conditions.

Shindler has also displayed a knack for the creative when necessary. For example, on the heels of the private placement in November, he wanted to add in some additional equitylike capital on the balance sheet to stay within the covenants of earlier debt instruments, and similar to the payment-in-kind exchangeable preferred stock he had successfully placed in 1997 and 1998. So, working with Goldman Sachs as lead manager, Shindler helped develop a zero-coupon convertible adjustable preferred stock (CAPS) security, which appreciated at 9.25 percent. And the company placed $150 million of the notes in December 1998, as a way to tide itself over for needed capital until liquidity returned to the mainstream debt and equity-linked markets.

“Steve has always been very aggressive about raising money for our needs,” says Donahue. “If there was the slightest opening, he’d take it. The CAPS was just one more example of how creative Steve can get to meet the needs of the company.”

Delivering A Credible Message

Shindler has also used financing as a way of communicating with Wall Street. In May 1999, for example, he arranged a private placement for Microsoft Corp. to invest $600 million in common stock that positioned Nextel for a new growth spurt, in terms of system build-out and development of new wireless services. It also sent a signal that new smart money was behind the company, and there would be better-than- expected returns coming.

Capitalizing on that message, Shindler arranged for Nextel to tap the convertible market again in June 1999, a popular equity source for telecom and cable companies at the time, due to bobbles in the stock market. The $600 million in eight-year bonds carried a coupon of 4.75 percent and were convertible at a 27 percent premium to the company’s stock price at the time, $20, split adjusted–a great investment, as it turns out, as the stock has appreciated approximately 175 percent since then.

Of course, driving those stellar returns was the fact that Nextel’s operations team was able to grow revenues and the subscriber base faster than anticipated, delivering the company to a positive cash-flow position ahead of schedule. For 1999 as a whole, Nextel generated $535 million in operating cash flow, compared with a cash loss of $220 million the previous year.

Shindler and his finance team contributed to this feat by tracking just where the company stood against goals at any time, allowing executives to increase pressure where needed. “We have always had the attitude that we need to raise money internally as well as externally, by having tight, efficient budgets and delivering more than promised,” says Shindler. “Efficiency creates liquidity.” He credits Nextel’s controller, Bill Arendt, with providing the experience and knowledge to make that feedback possible. “A lot of the success the finance organization has had is due to the great people I’ve had around me. Bill is the best in the business at building decision support systems and processes, and it’s one of the key things I needed to maintain our credibility with investors,” says Shindler.

Big Payoffs

That ability to consistently deliver more than promised allowed Donahue and Shindler to establish deep credibility with Wall Street and investors. Combined with the plentiful capital flowing last fall and the fact that the wireless industry was in favor with a broad array of investors, Nextel was able to reach new heights in deal making in the fourth quarter. Shindler arranged for the company to issue both common stock and debt simultaneously last November, resulting in the largest primary offering of stock at the time, at $2.8 billion, and a $2 billion placement of 10-year notes, paying just 9.375 percent.

Not that Nextel needed the cash immediately. Ever the opportunist, Shindler raised the capital with the hope of eventually buying additional radio spectrum, as well as continuing the expansion of its network. As of the end of the second quarter this year, Nextel had nearly $9 billion in cash and untapped credit commitments for new opportunities.

Now Shindler is on to a new opportunity himself. No longer “operationally green,” he was asked to take the reins of Nextel International early this year, in addition to maintaining his role as CFO, just before the company announced plans to spin off the overseas operation from its domestic parent in an initial public offering this fall. If his touch is anywhere near as golden as the CEO of the nascent firm, stakeholders of all stripes will have a lot to gain.