Ackerley, Telecorp soar on acquisition news; Alaris $150 mln joins calendar

By Paul A. Harris and Peter Heap

New York, Oct. 9 - News that two junk-rated issuers will be bought by investment-grade rated companies delivered big gains to their debt in high-yield trading Tuesday while details and timing emerged on a $150 million offering from Alaris Medical Systems - and some market participants were growing optimistic about the possibility of plenty more deals to come.

In the secondary market, a generally quiet session was marked by big moves upwards for The Ackerley Group, Inc. and Telecorp PCS.

Most striking was Ackerley's debt, which rose nearly 50% in value in response to news Monday morning that it will be acquired by investment-grade rated Clear Channel Communications, Inc.

The company's single outstanding issue, its $200 million senior subordinated notes due 2009, rose to 103.5 by Tuesday's close from 76 late Friday.

Ackerley's soon-to-be-parent, Clear Channel, is rated Baa3 by Moody's Investors Service and BBB- by Standard & Poor's while Ackerley subordinated debt is currently rated at B3 by Moody's and CCC+ by S&P, and has in recent weeks been the subject of adverse comment by the rating agencies. Clear Channel is expected to leave Ackerley's bonds outstanding but they may not make it to investment grade. S&P said it anticipates lifting them to BB+ once the merger closes while Moody's said only that it expects a "material" upgrade.

Despite the big move, traders said they saw relatively little activity in the company's debt.

And the news didn't spark much of a broader reaction either, even though it should be seen as positive for the broadcasting sector, one trader said. He named Lin Television Corp., Young Broadcasting Inc. and Paxson Communications Corp. as companies whose debt he thought might have benefited but didn't.

That subdued response reflected the overall tone of the high-yield market Tuesday, characterized as quiet and still feeling like "holiday mode" by traders.

"It's similar to the lack of movement in the equity markets," one trader said. "There are a lot of people sitting on the sidelines who feel some of these sell-offs are overdone. But there's not a lot of interest in putting money to work because there's so much uncertainty."

However one positive sign was a gain by Friday's new deal from Luscar Coal Ltd. Its new 9¾% senior notes (Ba3/BB) due 2011 were seen bid at 102.5 and "looking for paper," one trader said. The company sold $275 million of the securities at par via bookrunner Goldman, Sachs & Co. in an offering upsized from a planned $250 million.

"That's a good sign," the trader said of the gain, even though the company has the advantages of being a 4B name in a relatively safe sector.

In the telecom sector, action was mostly downwards again, although merger and acquisition news provided one significant gainer.

Telecorp Wireless' 10 5/8% subordinated notes due 2010 rose to 112 bid, 114 offer from 88 late Friday, adding a few more points Tuesday after significant gains on Monday in response to AT&T Wireless Services' announcement that it would buy the 77% of its Telecorp PCS affiliate it does not already own. (While the Bond Market Association recommended many sectors of the fixed-income world observe the Columbus Day holiday, the advice did not apply to the high-yield market so some activity did take place.)

More gains could be in store for the name, one trader said, saying the bonds "still look cheap on a spread basis."

AT&T Wireless will not be explicitly guaranteeing the debt of Telecorp Wireless and Tritel PCS, Telecorp PCS' two units, so the high-yield market is now trying to evaluate how much implicit support there will be - and how much of a discount those names should trade at relative to AT&T Wireless' debt.

Otherwise, telecommunications names generally continued their slide. McLeod USA's 11 3/8s traded at 17.5 and 18, from 19-20 last week, one trader said. He saw Level 3's 11s at 34, down a couple of points.

Details of Alaris' $150 million of five-year senior notes (B2/B+) emerged Tuesday. In the rumor mill for the past couple of weeks, the company began a roadshow Tuesday in California and will wrap up on Thursday in New York with pricing the same day via joint bookrunners UBS Warburg and Bear Stearns & Co., a source told Prospect News. Proceeds will go to repay bank debt and repurchase Alaris's 7¾%convertibles.

Syndicate officials pressed by Prospect News reported seeing no other deals drawing nigh, although there was consensus that some of those that have stalled in the wake of the Sept. 11 terrorist attacks must surely emerge soon.

"We're kind of lining those deals up like the Indy 500," one syndicate official said. "Everybody's rip-roaring to go. The documents are done. You just have to push the button and get them printed when they drop the green flag."

Deutsche Banc Alex. Brown high yield analyst Walter McGuire seems to anticipate a full field of contestants, with the flag dropping sooner than later. In a recently-released report, the analyst anticipates $13 billion in new high yield issuance in the fourth fiscal quarter of 2001.

Alluding to all of the delayed issuance waiting for that green flag to fall, McGuire told Prospect News that the remaining three months of 2001 could indeed each run an average of $4 billion worth of new deals.

"We only had $8 billion in Q3, so I think there's some pent-up demand, there," McGuire said. "That's of course from the late-summer absence of new issuance, which is normal, and of course the events of Sept. 11th, which was followed, basically, by a shut-down of the new issue market.

"So $13 billion actually gets us to what we actually expected at the beginning of the year," McGuire added. "I think we're going to play catch-up in November and December."

The Deutsche analyst also said that the higher-rated, double-B issuers have delayed going to market "because the rates are too high."

Those issuers will emerge, McGuire said, when the market rallies, producing lower rates.

"I think those people are ready," he said.

The above-mentioned syndicate official said the $13 billion figure "is possible because you're going to throw in all that September issuance that needs to get done."

Some of the sidelined deals, the syndicate official said, might not appear at the starting line at all (and here he alluded to EEX Corp.'s $350 million seven-year senior unsecureds, postponed last week).

"Some of those companies which were looking for opportunistic financing are gone," the official said. "There's no reason for them to come and pay 125 to 150 (basis points) wider than they were going to have to pay prior to this attack."

End

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