Alltel firms OID, B-3 breaks; ResCap nosedives on covenant, bankruptcy fears; Willbros sets talk

By Sara Rosenberg

New York, Nov. 16 - Alltel Communications Inc. finalized the original issue discount on its term loan B-3 and then allocated and freed up the paper for trading, with quotes ending the day right around the discount level.

Also in trading, Residential Capital LLC (ResCap) saw its bank debt plummet as concerns over covenant compliance and bankruptcy worries have overtaken the market.

In other news, Willbros USA Inc. came out with price talk on its revolver now that the deal was presented to lenders with a bank meeting.

Alltel's term loan B-3 hit the secondary market late Friday morning after the banks finalized the original issue discount on the paper at the wide end of guidance at 96, according to traders.

The original issue discount had been talked in the 96 to 96½ context.

On the break, the term loan B-3 was quoted at 96¼ bid, 96 3/8 offered; however, it quickly headed down to 95¾ bid, 96 offered in active trading, where it remained throughout the session, traders said.

The $4 billion 71/2-year term loan B-3 is priced at Libor plus 275 basis points and is non-callable for three years.

Of the total B-3 amount, only $3.2 billion was offered to investors because Barclays, one of the lead banks on the deal, opted to hold on to its piece rather than sell it at the discount level.

Originally, Alltel was in market with its $6 billion 71/2-year term loan B-2 tranche, but the banks decided to pull the B-2 on Thursday and syndicate the term loan B-3 instead as a result of market feedback.

The term loan B-2 is also priced at Libor plus 275 bps, but call protection is different from the B-3, with this tranche carrying soft call protection of 103 in year one, 102 in year two and 101 in year three.

Of the total B-2 amount, only $4.8 billion was being offered to investors because Barclays wanted to hold on to its piece of the debt.

At launch, the term loan B-2 paper was being offered with a discount in the 97 to 97½ area, but before being pulled, that offer price was changed to the 96 to 96½ area. At the time of the change, it was said by market sources that there was over $3 billion in the book at the revised discount range.

The term loan B-2 is now expected to be marketed at some later date.

Alltel's term loan B-3 and term loan B-2 are part of a $16.25 billion senior secured credit facility (Ba3/BB-/BB) that also includes a $1.5 billion six-year revolver, a $4 billion 71/2-year term loan B-1 and a $750 million one-year delayed-draw term loan, with 71/2-year final maturity, with all of these tranches priced at Libor plus 275 bps as well.

The revolver, term loan B-1 (which has no call protection) and delayed-draw term loan were not syndicated at this time.

Goldman Sachs, Citigroup, Barclays and RBS Securities acted as the joint bookrunners on the credit facility, with Goldman and Citi the joint lead arrangers.

The facility has a consolidated net senior secured debt to consolidated EBITDA covenant beginning June 30, 2008 based on consolidated EBITDA for the relevant rolling four-quarter measurement period ended as of such date.

Proceeds from the credit facility were used to help fund the leveraged buyout of the company by TPG Capital and GS Capital Partners for $71.50 per share in cash, which was completed on Friday. The transaction was valued at $27.5 billion.

Other financing came from $4.6 billion in equity, a $5.2 billion senior unsecured cash pay bridge loan and a $2.5 billion senior unsecured payment-in-kind option bridge loan.

The delayed-draw term loan will be available to purchase or otherwise acquire licenses and rights in the 700 MHz auction to be conducted by the Federal Communications Commission.

Pro forma for the transaction, Alltel Communications' senior secured debt to adjusted EBITDA is 4.6 times and net debt to adjusted EBITDA is 7.0 times. Total consolidated Alltel Corp. (the holding company) net debt to adjusted EBITDA is 7.7 times and adjusted EBITDA to Alltel Corp. consolidated cash interest expense is 1.5 times.

Alltel is a Little Rock, Ark., provider of wireless voice and data communications services.

ResCap drops on investor worries

ResCap's bank debt tanked during Friday's session as lenders are nervous about the company's ability to comply with covenants and whether that will lead to a bankruptcy filing, according to a trader.

The bank debt was quoted at 73 bid, 75 offered during the late afternoon, down about five points from Thursday's levels, the trader said.

"The perception is that the tangible net worth covenant will be busted before the 2008 maturity," the trader said.

"People think they're filing for bankruptcy," the trader added.

ResCap, a wholly owned subsidiary of GMAC Mortgage Group LLC, is a Minneapolis-based real estate finance company focused primarily on the residential market.

Willbros price talk

Moving to the primary, Willbros revealed price talk of Libor plus 325 bps (depending on receipt of pro forma compliance certificate) on its $150 million three-year revolver now that the deal has launched with a bank meeting that took place on Thursday, according to a market source.

In addition, price talk on the performance letters of credit that are drawn under the revolver emerged at Libor plus 250 bps, the source said.

The entire revolver is available for letters of credit.

For orders of $15 million, lenders will get an upfront fee of 37.5 bps. Commitments are due on Dec. 6.

The revolver has a 50 bps commitment fee and a $50 million accordion feature that is available during the first two years.

Calyon is the lead bank on the deal, which will be used to refinance the company's existing $100 million synthetic credit facility.

Under the credit facility commitment, Willbros has the option to get a $100 million four-year term loan to backstop the $202.5 million cash funding requirements for its acquisition of Integrated Service Co. LLC.

However, as a result of the success of the company's equity offering, the term loan will likely be cancelled and therefore it is not currently being marketed, the source added.

On Thursday, the company priced 6.875 million shares of common stock at $34.00 per share. Net proceeds from the offering, after deducting underwriting discounts and offering expenses, are expected to be $219.3 million.

Willbros is a Panama-based provider of engineering, construction and specialty services to the oil, gas and power industries and to governmental entities.

CommScope ups OID

CommScope Inc. increased the original issue discount on its $1.35 billion term loan B to 99 from 991/2, according to a market source.

The term loan B is priced at Libor plus 250 bps.

CommScope's $2.5 billion senior secured credit facility (Ba3/BB-) also includes a $400 million revolver and a $750 million term loan A, with both of these tranches priced at Libor plus 225 bps.

Bank of America and Wachovia are the lead banks on the deal.

Security is substantially all of the company's domestic assets.

Proceeds will be used to help fund the acquisition of Andrew Corp. for $15.00 per share, comprised of $13.50 per share in cash and an additional $1.50 per share in either cash, CommScope common stock, or a combination of cash and common stock, at CommScope's option. The deal is valued at $2.6 billion.

CommScope is a Hickory, N.C., provider of infrastructure services for communication networks. Andrew is a Westchester, Ill., designer, manufacturer and deliverer of equipment and services for the communications infrastructure market.

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