Amer Tower, Global Xing off but others rise after Fed; market awaits Triton PCS deal

By Paul Deckelman and Paul A. Harris

New York, Nov. 6 - American Tower Corp. bonds were sharply lower Tuesday after the communications antenna tower company posted a wider-than-expected third-quarter loss - and warned that its fourth-quarter loss would also exceed forecasts. Global Crossing was also down as its planned merger with its Asia Global Crossing affiliate fell apart.

In the primary sphere, players awaited Triton PCS's $300 million 10-year note issue, which could price as early as Wednesday's session. And price talk emerged for Land O'Lakes' $300 million 10-year offering, also expected to price this week.

After the Federal Reserve's policy-making Federal Open Market Committee dropped the benchmark federal funds target rate on overnight bank loans half a point to 2% - the lowest that key rate has been since the fall of 1961 - stocks and Treasury notes alike rose, with the bellwether Dow Jones Industrial Average jumping 150 points and the Nasdaq Composite Index up 41 points, or 2.3%.

Most high yield issues were also seen higher. "Everything was up today," a trader said, naming such widely varied issues as Northwest Airlines, Conseco Inc., Service Corp. International, Tommy Hilfiger and the retail sector.

Well, maybe not literally everything rose. American Tower's bonds "got slammed, down six points" the trader said, after the Boston-based telecommunications antenna tower operator reported a third-quarter net loss of $124.9 million (65 cents a share), wider than a loss of $39.5 million (22 cents a share)a year ago. The loss was also considerably wider than the 48 cents per share analysts had been expecting. While the net loss for the quarter widened, EBITDA (earnings before income, taxes, depreciation and amortization, a key bond market measure of cash flow and ability to service debt, rose to $71.2 million from $58.7 million a year earlier.

Even so, American Tower's 9 3/8% notes due 2009 opened around 76 bid/79 offered Tuesday morning, and had plunged as low as 72 bid by day's end from prior levels around 80.

American Tower also projected that due to a slowdown in the overall telecommunications industry, it expects a fourth-quarter loss in a range of 66 cents to 75 cents a share, wider than its previous outlook of 43 cents to 54 cents. The company projects a full-year loss of between $2.23 and $2.33 a share, worse than the originally predicted $1.78 to $1.99 range.

While American Tower's bonds were down, there was no immediate fallout seen among other tower companies.

Elsewhere in telecom, the previously proposed nuptials between Global Crossing Ltd. and its 59%-owned affiliate Asia Global Crossing Ltd. were called off, on account of weak market conditions. Global Crossing Holdings' bonds were heard to have retreated down to the 12-13 bid range across the board from prior levels around 16-17.

Nextel Communications Inc. bonds, which had gained around two points across the board Monday, "hung in there" Tuesday, a trader said, quoting its 9 3/8% notes due 2009 at 72.25 bid/73.5 offered, up about a quarter point, "but they didn't really run today, pretty much opening and closing right in the same market, maybe up a quarter point."

He also saw Level 3 Communications Inc.'s benchmark 9 1/8% senior notes due 2009 opening at 49 bid/51 offered, up about a point from Monday's close, before trading off slightly from those highs, "but there was nothing major there."

Outside of the telecoms, the trader said, a notable mover was Kmart Corp., which could see its split-rated debt ratings sink back down to pure junk status. Moody's Investors Service, citing concerns that the Troy, Mich.-based discount giant's debt level will not be significantly reduced soon, put Kmart's ratings, including its Baa3 senior unsecured rating, under review for a possible downgrade. Moody's had lifted the company's ratings in April 2000, boosting its bonds to Baa3 from Ba1 previously. Standard & Poor's maintains the company's bonds at a high-junk rated BB+.

The trader saw Kmart's 9 3/8% notes due 2006 closing around 89 bid/91 offered, down from their day's high around 92 early in the session. A week ago, they had traded around the 97 level and had ended Friday's dealings around the 85.5 bid/87.5 level.

"There really was no major fallout today (from the Moody's announcement)," he said, but noted that the fall from week-ago levels was an indication that "maybe some people knew what was going on and drove them down five or six points," effectively building the possibility of a ratings downgrade into the current bond price levels.

Even with the Moody's news and broader economic news over the past several sessions "which certainly hasn't helped it," he said, "some of their paper remains hard to find," such as Kmart's 12½% paper which was bid without an offer, "believe it or not. But we're looking to see some of this paper come in over the next couple of days, as we go forward."

Among issues reporting earnings data during the session, Time Warner Telecom Inc. said its third-quarter net loss widened to $24.3 million (21 cents a share) from $2.3 million (2 cents a share) a year earlier. But the Littleton, Colo.-based provider of voice and data communications services to businesses also noted that revenues rose 43% to $172.7 million, in line with the company's recently reduced guidance, while EBITDA rose 30 percent to $37 million.

Time Warner Telecom's bonds were up a point to 79 bid, while its shares rose $1.57, (14.88%), to close at $12.12 on Nasdaq, as analysts expressed optimism about some recent awards of contracts, and about the company's long-term prospects.

In the primary, a fast moving deal from Pennsylvania-based wireless phone company Triton PCS, Inc. - $300 million of 10-year notes announced late Monday - generated a good deal of talk and speculation among primary market players Tuesday.

"I don't think it should have any problems getting done," Theresa Fennell, vice president and senior portfolio manager for the American Century High Yield Fund, told Prospect News.

Fennell noted that Triton's corporate affiliation with AT&T Wireless Services - and talk that

AT&T Wireless might acquire Triton at some point - was causing Triton's existing paper to trade up.

"AT&T (Wireless) just purchased TeleCorp (PCS, Inc.) and Tritel (PCS, Inc.), which were also affiliates, giving them, basically, an AT&T (Wireless) credit rating," Fennell commented. "And Triton, being an affiliate of AT&T, got a boost at that time, such that the 9 3/8% bonds are trading at 104-105, on the expectation that sometime AT&T Wireless will roll them up as well.

"The wireless sector in general hasn't had the stigma that the wireline, or CLEC, or even the towers have associated with them, particularly these AT&T affiliates," Fennell continued. "Right now the yield on (Triton's) existing paper is 8.50%.

"It's very do-able to bring a deal like that."

Although price talk had reportedly not emerged on the Triton bonds at the end of Tuesday's session, market sources were buzzing with speculation on this deal. Several commented to Prospect News that AT&T Wireless Services was facing a significant capital expenditure to update its technology - one which its affiliates would have to undergo as well - and that the company might decide that "acquisition" was the most expedient means of meeting this expense.

"Let's face it," one source said. "AT&T has had a whole host of problems, and I think this is one means of solving them. I think this passes the 'common man'-test.

Elsewhere in Tuesday's primary market, price talk of 8 ¾%-9% emerged on Land O'Lakes $300 million of 10-year notes via J.P. Morgan. The deal is set to price Wednesday afternoon, according to market sources.

Also set to price, Wednesday, is Woolworths Group PLC's £100 million of five-year notes via Barclays Capital. Monday's price talk was 8 ¾%-9%.

American Century's Fennell told Prospect News that she believes the laws of supply and demand in the high yield primary currently favor the sell-side.

"At this point the tables have turned from being a buyer's market to really a lack of supply making it almost a seller's market," she said.

"There is a demand for quality new issuance. It's just a matter of the bankers bringing the deals quickly enough to meet this demand.

"In the past couple of weeks that's why the deals that have come have upsized, and have traded well."

End

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