Alltell hitting road with deal as calendar fattens; Melrose drops out; Trump falls as buyout talks falter

By Paul Deckelman and Paul A. Harris

New York, Nov. 2 - Alltel Communications Inc. was heard by high yield syndicate sources to be preparing to begin a roadshow Monday for a portion of its $7.7 billion bond issue, which will partially fund the pending $27.5 billion leveraged buyout of the Little Rock, Ark.-based telecommunications company.

Also heard ready to hit the road this upcoming week is Key Energy Services, Inc., which will be shopping a $400 million offering of 10-year notes to investors beginning Tuesday.

Other new deals heard to be getting into the pipeline included the Mashantucket Pequot tribe's $500 million eight-year deal, McMoRan Exploration Co.'s $400 million seven-year issue, and East Valley Tourist Development's $275 million eight-year secured bond offering.

However, the currently unsettled credit market conditions claimed a victim Friday, as Melrose Resources plc decided to shelve its planned euro-denominated eight-year note deal, at least for now.

In the secondary market, Trump Entertainment Resorts Inc.'s bonds were seen down several points in heavy trading, along with a big slide in its shares, on a newspaper report that talks to sell the underperforming Atlantic City, N.J.-based gambling operator had crapped out.

A big loser, a trader said, was E*Trade Financial Corp., although he saw no fresh negative news out on the company that would explain the wild and seemingly random swings of its bonds, which gyrated between the mid-90s and the upper 70s before finally coming to rest near the lower end of that range.

Housing names like Standard Pacific Corp. and Hovnanian Enterprises Inc. were getting hammered, hurt by a Standard & Poor's downgrade of a bunch of homebuilders, among them industry leaders Lennar Corp., D.R. Horton and Pulte Homes, all of which were knocked down to junk status by the agency; S&P also lowered Standard Pacific, already a junker, further down into speculative-grade territory.

Overall, trading continued to have a negative tone. Declining issues outnumbered advancers by around a 3.5-to-two margin. A trader saw the CDX junk bond performance index down 9/16 point at 97 9/16 bid, 97 11/16 offered. Among other market barometers, the KDP High Yield Daily Index fell 0.06 to 79.52, while its yield was 2 basis points wider at 8.10%.

A high yield syndicate official said that although junk continued to ease on Friday it caught a late-session tailwind from rallying equities prices, and firmed a bit at the close.

Alltel brings cash-pays

No junk bonds priced during the final session of the October-November crossover week, although the primary market generated a copious amount of news.

Alltel Communications and Alltel Communications Finance, Inc., will begin a roadshow on Monday for a portion of their LBO-related cash-pay notes.

The size of the offering, which is expected to price before the Friday close, remains to be determined.

Citigroup, Goldman Sachs, Barclays and RBS Securities are leading the deal.

In a Thursday press release the company disclosed the structure of its $7.7 billion of bond and/or bridge debt financing in connection with the merger of Alltel and Atlantis Merger Sub, Inc.

The financing will include $5.2 billion of senior unsecured debt consisting of senior unsecured cash pay notes and senior unsecured cash pay bridge credit facilities.

That's the part that hits the market on Monday, although an informed source maintained that underwriters would remain "disciplined" with respect to the amount of bonds they would attempt to place, meaning the offering will likely be well under $5.2 billion.

Alltel also announced up to $2.5 billion of senior unsecured PIK debt on Thursday - all or a portion of which may take the form of senior unsecured PIK-option bridge credit facilities.

The PIK is expected to remain on the sidelines for the time being.

Also in the market with a "north-of-a-billion" deal is United Rentals Inc.

The Stamford, Conn., equipment rental company is marketing a $2.55 billion offering of seven-year second-priority senior secured notes, which are expected to price late in the week via Credit Suisse, Banc of America Securities LLC, Lehman Brothers and Morgan Stanley.

Gaming deals

The tribal gaming sector rang in during the Friday session.

The Mashantucket Pequot Tribe will begin a roadshow on Monday for its $500 million offering of eight-year taxable notes (Ba1/BB+).

The roadshow is scheduled to wrap up on Thursday, with the notes expected to price that same day.

Merrill Lynch & Co. and Morgan Stanly are joint bookrunners for the debt refinancing, capital expenditures and general corporate purposes deal from the Connecticut-based firm.

Elsewhere East Valley Tourist Development Authority was heard to be returning to the high yield with a $275 million offering of eight-year senior secured notes (B1/B), which, like the deal the California gaming firm pulled in August, is expected to be led by Merrill Lynch & Co.

An informed source said that the offering is expected to come to market during the Nov. 5 week.

In early August the company abandoned its attempt to place a downsized, restructured $275 million offering.

Merrill Lynch was the bookrunner for that deal, which was downsized from $290 million, while the maturity of the abandoned notes had been decreased to seven years from eight years. Price talk on the pulled deal increased to a 10½% coupon, at a discount, to yield 11%. Earlier those notes had been talked at the 9½% area.

Energy names join calendar

McMoRan Exploration Co. has launched a $400 million offering of seven-year senior notes which is expected to price late in the week.

JP Morgan and Merrill Lynch & Co. are joint bookrunners for the debt refinancing related to acquisitions.

McMoRan Exploration is a New Orleans-based oil and gas exploration, development and production company.

Meanwhile Key Energy Services, Inc. will start a roadshow on Tuesday for its $400 million offering of 10-year senior unsecured notes (B1/B), which is expected to price during the Nov. 12 week.

Lehman Brothers is quarterbacking the debt refinancing general corporate purposed deal from the rig-based well services provider.

Meanwhile China's Agile Property Holdings Ltd. will begin a roadshow on Monday for up to $400 million of senior notes (Ba3/BB) in tranches of fixed- and floating-rate notes via HSBC.

That Rule 144A/Regulation S deal is also expected to price early in the Nov. 12 week.

Melrose postpones

Melrose Resources postponed its planned €250 million offering of eight-year senior subordinated notes (CCC+) because of market conditions on Friday.

The notes had been talked at 10% to 10¼%. However, according to market sources, the deal was generating very little investor interest at those levels.

Merrill Lynch was the bookrunner for what had been expected to be the first issue of high yield bonds from a European issuer since the mid-summer sell-off in the international credit markets.

$1.4 billion week

With no issues pricing on Friday the October-November crossover week came to a close having seen slightly more than $1.42 billion of dollar-denominated issuance in four tranches of junk.

That's the lowest weekly total since the week beginning Aug. 27, which saw just $26 million price in a single tranche.

Nevertheless at Friday's close, with the market having seen just under $143.2 billion of year-to-date issuance, 2007 remains nearly 25% ahead, on a year-over-year basis, of issuance seen in the record-setting year of 2006 which, at the Nov. 2 close had seen slightly less than $115.7 billion.

More dramatically, with $143.2 billion having cleared the primary thus far in 2007 this year's primary market requires a mere $13.4 billion more of issuance to surpass that 2006 all-time issuance record of $156.6 billion.

Alltel existing notes trade off

News of Alltel's plans to put into motion the massive bond and bank-debt borrowing to fund its buyout were seen having pushed its existing notes lower on investor fears of the effects of the additional leverage, with its 7% notes due 2012 off more than 2½ points at 89.875.

Trump gets dumped

Apart from new-deal related movements, Trump Entertainment Resorts bonds were "down a couple of points" to 82.5 on "a lot of volume," a trader said.

A market source at another desk said they in fact were probably the most heavily traded issue of the day in junk-land - well over $72 million had changed hands by mid-afternoon, almost triple the handle at that time of the of the next closest bond, Idearc Inc.'s 8% notes due 2016. That source pegged the Trump bonds down about 2½ points by day's end, also at 82.5.

The bonds fell in tandem with the company's Nasdaq-traded shares, which nosedived $1.35, or 16.58%, to close at $6.79. Volume of 2.2 million shares was about 2½ times the usual turnover.

That debacle occurred, ironically, just a day after the company posted its first rise in quarterly income in four quarters, with profits up 14% to $6.63 million, or 21 cents a share, beating Wall Street's expectations.

But the afterglow from that financial feat quickly wore off as Friday's editions of the Newark, N.J.-based Star-Ledger, the state's largest newspaper, reported that talks to sell the company, or at least one or more of its three properties in the city to Cordish Co., a Baltimore-based real estate operator, had collapsed. The paper, attributing its information to unidentified sources "familiar with the situation," said that the talks failed when Cordish's financial backer, Goldman Sachs & Co., balked.

It was the second time this year that the company failed to come to an agreement with a potential suitor; in June, Trump rejected an offer from former company executive Dennis Gomes to acquire its Taj Mahal hotel and casino on the Boardwalk.

Idearc drops after lower numbers

Idearc's 8% notes, meantime, were seen finishing down 1¼ points at just over 99 bid.

On Thursday, the Dallas-based telephone directory publisher reported its third-quarter earnings of $117 million, or 80 cents per share, versus $245 million, or $1.68 per share, during the same period in the prior year. The company said its profit slipped 52% on an accounting change and lower print sales. Idearc's adjusted earnings dipped to $128 million, or 88 cents per share, from $140 million, or 96 cents per share, a year earlier.

E*Trade on wild ride

Elsewhere, a trader declared that "one of the biggest movers on the day" was E*Trade Financial's 7 7/8% notes due 2015, which were "all over the place today." He saw the bonds gyrate between a low print of 79 and a high of 95, before finally coming to rest at 81 bid, down 15 points on the session.

He saw no news out on the New York-based financial services company, which provides a variety of services to both retail and institutional customers, and also saw "no specific trend" in the bonds' movement. "One of the prints at 4 p.m. (ET) was at 94 - and the next print was at 81."

Moody's Investors Service on Friday named E*Trade's $201 million of AAA rated senior secured notes from an E-Trade collateralized debt obligation as being under review for a possible downgrade, as part of a series of such possible downgrades that could affect some $5 billion of CDO debt linked to various companies. Speaking specifically of the E-Trade review, Moody's cited a deterioration in the credit quality of the transaction's underlying collateral pool, which consists primarily of structured finance securities.

Housing issues off on downgrade

Another downgrade, this one by Standard & Poor's, was seen playing a big role in knocking down a number of housing junk bond issues.

S&P lowered the rating of Lennar, the biggest builder, to BB+, a two-notch downturn from BBB previously, while cutting Pulte and D.R. Horton one notch to BB+ from BBB- previously. All three of the fallen angels were lowered with a negative outlook, meaning another downgrade is possible; however, all of them remain investment grade-rated by Moody's and by Fitch Ratings.

S&P also lowered Standard Pacific's already below-investment-grade ratings further into junk territory at BB-, a one-notch decline. The agency cited the continued weakness in the industry in explaining the downgrades.

A trader said that the S&P move cast a pall over the whole homebuilding sector, blaming it as the catalyst for a 1 point fall in the bonds of various junk-rated builders. He saw Standard Pacific's 6½% notes due 2008 at 89.5 bid, 90.5 offered, Beazer Homes USA Inc.'s 8 3/8% notes due 2012 at 80 bid, 81 offered, and Hovnanian's 8 5/8% notes due 2011 at 81 bid, 82 offered - all down 1 point on the day. A market source elsewhere pegged Hovnanian's 6 3/8% notes due 2014 off ½ point at 78.5

Hovnanian, meantime, reaffirmed its expectations of positive cash flow for the fourth quarter (see related story elsewhere in this issue).

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