Alamosa extends exchange for three series of notes

New York, Nov. 7 - Alamosa Holdings, Inc. (Caa3) said it extended its exchange offer for three series of its outstanding notes to 5 p.m. ET on Nov. 10, subject to possible further extension, from 5 p.m. ET on Nov. 7.

The company said that it had either received or been advised by Noteholders that it would receive tenders in excess of 97% of its outstanding existing notes, including $238.4 million principal amount or 95.4% of its 12½% senior notes due 2011, $147.5 million principal amount or 98.4% of its 13 5/8% senior notes due 2011 and $341.9 million principal amount or 97.7% of its 12.875% senior discount notes due 2010.

Alamosa said that in view of the result and after consultation with the noteholder committee it has decided not to require the tender of 97% of each separate tranche of notes as a condition to the exchange.

Alamosa said it expects to complete the exchange on Nov. 10.

As previously announced, Alamosa, a Lubbock, Tex.-based Sprint PCS affiliate serving customers in the Southwest, Western and Midwestern U.S. said on Sept. 12 that it had begun an offer to exchange new debt plus convertible preferred stock and contingent value rights based on its common stock's performance for its outstanding public debt. On Sept. 22, Alamosa held a conference call with investors to talk about its exchange offers, during which some investors expressed concerns about supporting the original plan, so on Oct. 15, the company announced modified terms that included the elimination of the contingent value rights portion of the consideration to be paid to the holders of the outstanding debt for their participation in the exchange.

Alamosa said that the exchange offer was being undertaken as "the final step in a financial restructuring intended to de-leverage the company and stabilize its key business relationships."

It said that the exchange offer had the support of an ad hoc committee of public bondholders whose members hold approximately 45% in principal amount of Alamosa's outstanding public debt.

Alamosa proposed that the holders of the outstanding $400 million aggregate principal amount of its 12½% senior notes due 2011 and 13 5/8% senior notes due 2011 exchange their bonds for a total of $260 million in Alamosa (Delaware), Inc.'s new 11% senior notes due 2010 and 400,000 units (each consisting of one share of the company's series B convertible preferred stock plus 73.61 contingent value rights tied to the performance of Alamosa's common stock during the six months after consummation of the exchange). The noteholders would also receive accrued and unpaid interest as of the date of the exchange.

One of the major changes announced on Oct. 15 was the elimination of the contingent value rights, which would have entitled the holders to receive additional cash payments (subject to some restrictions under the credit facility), debt or common stock depending on the performance of Alamosa's common stock for the period ending six months from the close of the restructuring transactions. Under the CVRs, Alamosa would have paid the amount by which $3.40 exceeds the greater of either the weighted average price of Alamosa stock during the six months following completion of the exchange or $2.82. Alamosa could have made the payment in cash - but only if there were no borrowings on its credit facility - in stock using shares valued at $2.82 or in new notes. If the stock trades above the $3.40 target price for 20 out of 30 trading days the rights would be extinguished.

The company further initially proposed that the holders of the outstanding $298 million accreted amount of its zero-coupon senior discount notes due 2010 would receive a total of approximately $194 million in Alamosa (Delaware), Inc.'s new 12% senior discount notes due 2009, plus 298,000 of the convertible preferred stock plus contingent value rights units. The CVRs, as noted, were eliminated in the modified terms announced on Oct. 15.

Alamosa said the preferred stock would have an initial liquidation preference of $250 per share, and initially said quarterly interest would accrue at 6% for the first five years from issuance and that after that the preferreds would pay cash dividends at 4.5% of the accreted value to maturity on July 31, 2013. Based on an initial conversion price of $3.40, the company said the preferred stock would be convertible into 51.4 million shares of Alamosa's common stock, representing approximately 35% of the equity on a fully converted, fully diluted basis.

On Oct. 15, Alamosa modified the terms of the exchange offers by, as already noted, eliminating the contingent value rights, and by changing the dividend rate on the Series B preferred stock, increasing it on the Series B preferred stock from a 6% accretion/4.5% annual dividend rate to a fixed 7.5% annual dividend rate with payment of dividends.

The exchange offers were also modified to include a new series C preferred stock with a conversion price of $4.25. Terms of the series C preferred are identical to the series B preferred stock to be issued under the exchange offers, except that the series C conversion price is $4.25, versus the series B conversion price of $3.40.

Alamosa said that through July 31, 2008, it would have the option to pay preferred dividends: (i) in kind with Series C Preferred shares, (ii) in common stock valued at the stock's average closing price for the five trading days prior to the dividend record date, or (iii) in cash (subject to certain restrictions under the senior secured credit facility); or (iv) any combination of the previous. It said that all dividends payable after July 31, 2008 would still have to be paid in cash. Issuance of the series B and series C preferred stock could potentially result in an additional 6.9% dilution of the fully diluted, fully converted common stock based on the exchange offers, if all dividends were to be paid in series C preferred stock until July 2008 and if Alamosa did not redeem the series B and series C preferred stock before its maturity in 2013.

Other modifications to the offer terms that which were announced on Oct. 15 included the addition of the right for Alamosa to redeem the preferred stock after three years, and the elimination of the "automatic conversion" feature.

Under the revised terms, Alamosa would be able to redeem the preferred stock, based on a tiered premium schedule, beginning in year-4 at a premium of 25% over the stated value of the preferred stock. The premium would decline by 5% per year until it was eliminated. Finally, while Alamosa would have had the right, under the original offer terms, to "automatically convert" the remaining preferred shares to common stock once two-thirds of the preferred shares were initially converted, that provision is no longer contained in the exchange offers.

Alamosa said that the exchange offer would require holders of 97% of the face amount of its existing notes to tender their securities. If less than 97% of the bondholders agreed to tender their existing notes, Alamosa would have the option of completing the restructuring through a prepackaged plan of reorganization.

The company said the prepackaged plan would provide the same consideration to bondholders and embody the same amendments to the Sprint agreements and senior credit facility. It could be effectuated with support of only two-thirds in principal amount and more than 50% in number of the bondholders. The prepackaged plan of reorganization would not affect any other creditors of Alamosa.

The company said that two key components of the restructuring which the debt exchange offer is a part of - the renegotiation of the Sprint agreements under which Alamosa operates and the renegotiation of certain terms of Alamosa's senior secured credit facility - have already been accomplished, subject to the consummation of the exchange offer. The renegotiated Sprint agreements will provide long-term pricing predictability for service bureau fees and stability to the rates charged for inter-service area fees, while the renegotiated credit facility terms, which have already been unanimously approved by the senior secured lenders, will provide additional flexibility by easing certain debt covenants.

It further said that the restructuring plan would provide for over $240 million of principal debt reduction and over $260 million in cumulative cash interest expense savings and expected economic benefits resulting from modifications to the Sprint agreements. Collectively, the restructuring and the amendments to the Sprint agreements "will allow management to focus on maximizing its business plan and capitalizing on growth opportunities while preserving Alamosa's flexibility to pursue attractive business acquisitions and combinations," Alamosa said in its news release.

On Oct. 30, the company - which previously said that it had had received received commitments from holders of 68% of its existing notes to support and tender into the exchange and vote in favor of its prepackaged plan of reorganization - said it had sufficient votes in favor of the prepackaged Chapter 11 plan and, accordingly, could carry out the previously announced restructuring transactions through confirmation of the Prepackaged Plan, if necessary. Alamosa extended the exchange offers (to 5 p.m ET on Nov. 4, subject to possible further extension) in order to permit all noteholders who had not previously tendered to tender their existing notes so that tendering noteholders could receive the same consideration that would be delivered to noteholders under the Prepackaged Plan more quickly and without the possible downside risk to investors and incremental costs associated with a bankruptcy filing.

Alamosa said it had executed supplemental indentures eliminating substantially all of the covenant protection in the existing indentures, subject to consummation of the exchange offers. Therefore, it said the "consent date," as defined in the documents for the exchange offers sent to holders of existing notes, was declared as Oct. 29, and tenders of existing notes or consents to the supplemental indentures could no longer be withdrawn.

Wells Fargo (612 316-4305) is the exchange agent and information agent.

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