Alltel rises on buyout agreement; Tribune up with call; Airlines strengthen; TriZetto timing emerges

By Sara Rosenberg

New York, June 5 - Alltel Communications Inc.'s term loan debt continued to gain ground during Thursday's trading session as a definitive acquisition agreement with Verizon Wireless was announced.

Also in trading, Tribune Co.'s term loan debt was stronger as the company held a call to discuss earnings and update lenders on the business, and the airline sector as a whole was better, with names like UAL Corp., Northwest Airlines Corp., Delta Air Lines Inc., US Airways Group Inc. and AMR Corp. all seeing improvements.

In other news, TriZetto Group Inc. firmed up timing on the launch of its credit facility; however, details on size and structure are still unavailable.

Alltel's term loans traded higher on Thursday after Verizon Wireless proved the recent rumors to be true by confirming that it is buying Alltel, according to a trader.

The term loan B-1 was quoted at 98 5/8 bid, 99 1/8 offered, up from 96¾ bid, 97½ offered on Wednesday and 93 3/8 bid, 93 7/8 on Tuesday, the trader said.

The term loan B-2 was also quoted at 98 5/8 bid, 99 1/8 offered, up from 97 1/8 bid, 97 5/8 offered on Wednesday and 93¼ bid, 93¾ on Tuesday, the trader continued.

And, the term loan B-3 was quoted at 99 3/8 bid, 99 7/8 offered, up from 97½ bid, 98½ offered on Wednesday and 93¾ bid, 94¼ offered on Tuesday, the trader added.

According to the trader, the assumption is that the Alltel debt will be taken out in connection with the acquisition by Verizon, with the B-1 and B-2 expected to be paid down at par, and the B-3 expected to be paid down at 101.

On Thursday morning, Verizon Wireless announced that it is purchasing the equity of Alltel for about $5.9 billion from TPG Capital and GS Capital Partners.

Based on Alltel's projected net debt at closing of $22.2 billion, the aggregate value of the transaction is $28.1 billion.

Morgan Stanley acted as financial advisor to Verizon Wireless on this transaction and is providing bridge financing.

Citibank, Goldman Sachs and RBS advised the sellers on the transaction.

"This is a perfect fit, with Alltel's high-value post-paid customer base, its solid financials, our common network technology, and significant, readily attainable synergies," said Ivan Seidenberg, Verizon Communications' chief executive officer and chairman of the board, in a news release. "Verizon Wireless' acquisition of Alltel clearly provides opportunities for enhanced value for Verizon shareholders."

Verizon Wireless expects to realize synergies with a net present value, after integration costs, of more than $9 billion driven by reduced capital and operating expense savings. Synergies are expected to generate incremental cost savings of $1 billion in the second year after closing.

Completion of the acquisition is targeted to happen by the end of the year, subject to regulatory approvals.

Basking Ridge, N.J.-based Verizon Wireless is a joint venture of Verizon Communications Inc. and Vodafone Group plc that operates a wireless voice and data network. Alltel is a Little Rock, Ark.-based provider of voice and advanced data services.

Tribune rises

Tribune's term loan debt moved into higher territory during market hours as the company held a lender call to discuss first-quarter financial results that were released in May and to provide an update on operations and financial activity, according to a trader.

The Chicago-based media company's term loan B was quoted at 77¼ bid, 77¾ offered, up from 76 bid, 76½ offered on Wednesday, the trader said.

And, the term loan X was quoted at 96½ bid, 97½ offered, up from 95½ bid, 96½ offered, the trader added.

According to a second source, the Tribune call went well, as evidenced by the bank debt's performance.

The company said in the call that LTM EBITDA was $1.3 billion or 8.1 times guaranteed debt leverage, versus a maintenance test under the credit facility of 9 times, and liquidity was in excess of $1 billion, the second source remarked.

The company also announced on the call that it has a letter of intent with a leading financial institution for a $250 million commercial paper program.

As for asset sales, the sale of Newsday for $650 million is expected to close in the third quarter, the sale of the Cubs is progressing as books went out to Major League Baseball and are expected to be given to prospective bidders next week, with bids due 30 days afterwards, and talks for the potential sale of the company's 31% stake in the Food Network have occurred with multiple parties.

The source went on to say that Sam Zell, chief executive officer of Tribune, said that future asset sales, including the Cubs and Food Network stake, if sold, would be structured in such a way as to minimize taxes.

In addition, Tribune told lenders that it is in the process of retooling its newspapers to reduce production and editorial costs.

Furthermore, Tribune said that the capital expenditure budget is now $95 million to $100 million, down from the previously indicated guidance of around $130 million to $150 million.

Although management did not provide guidance on the call, they did indicate that results for the month of March were the softest month of the first quarter due to the timing of Easter, that April results for newspaper publishing operations were better than March and that results had since leveled off, the source added.

Airlines fly higher

The airline sector in general got a boost on Thursday in an overall cash market that was up at least a quarter of a point, and LCDX 10 was up as well with levels of 99.10 bid, 99.25 offered compared to the prior 98.85 bid, 98.95 offered levels, according to a trader.

For example, Chicago-based UAL saw its term loan quoted at 78 bid, 79½ offered, up from 77 bid, 78½ offered, the trader said.

Tempe, Ariz.-based US Airways saw its term loan quoted at 70½ bid, 71½ offered, up from 68¾ bid, 69¾ offered.

Eagan, Minn.-based Northwest Airlines saw its term loan quoted at 79½ bid, 80½ offered, up from 78¼ bid, 79 offered, the trader continued.

Atlanta-based Delta Air Lines saw its first-lien term loan quoted at 85 bid, 86½ offered, up from 84¼ bid, 85¼ offered.

And Fort Worth, Texas-based AMR saw its term loan quoted at 90 bid, 92 offered, up from 89¼ bid, 90¼ offered, the trader remarked.

The rally in the airlines sector came after Houston-based Continental Airlines announced a "bunch of restructurings and layoffs", the trader added.

On Thursday, Continental said that it is eliminating 67 mainline aircraft and 3,000 positions, and that its chief executive officer and president are declining their salaries for the remainder of the year.

"The airline industry is in a crisis. Its business model doesn't work with the current price of fuel and the existing level of capacity in the marketplace. We need to make changes in response," the Continental news release said.

"While there have been several successful fare increases, those increases haven't been sufficient to cover the rising cost of fuel. As fares increase, fewer customers will fly. As fewer customers fly, we will need to reduce our capacity to match the reduced demand. As we reduce our capacity, we will need fewer employees to operate the airline. Although these changes will be painful, we must adapt to the reality of today's market to successfully navigate these difficult times," the release added.

TriZetto sets launch

Moving to the primary, TriZetto nailed down timing on the launch of its proposed credit facility with the scheduling of a conference call for June 20, according to a market source.

RBC Capital Markets is the lead bank on the deal.

Details on the structure of the deal are not yet available but are expected to surface soon, the source said.

In addition to the credit facility, the company is thinking of getting some sort of junior tranche of debt.

According to recent filings with the Securities and Exchange Commission, the total debt financing commitment from RBC is for $630 million.

Proceeds will be used to help fund the buyout of the company by Apax Partners for $22 per share in cash. The transaction is valued at $1.4 billion, including consideration for stock options and shares related to TriZetto's outstanding convertible notes.

BlueCross BlueShield of Tennessee and Regence Group, both customers of TriZetto, are providing a portion of the funding for the transaction and will be equity investors in the newly private company.

The transaction is subject to customary closing conditions, including shareholder and regulatory approvals.

A shareholder meeting to vote on the buyout will take place on June 30, and the Federal Trade Commission granted early termination of the Hart-Scott-Rodino waiting period in the proposed acquisition in April.

TriZetto is a Newport Beach, Calif., developer, licenser and supporter of proprietary and third-party software products for the health care industry.

Anchor Glass firms pricing

Anchor Glass Container Corp. finalized pricing on its $350 million term loan in line with initial talk, according to a market source.

The term loan is priced at Libor plus 450 bps, with a 3.5% Libor floor, and was offered to investors at an original issue discount of 98.

Credit Suisse is the lead bank on the deal.

Proceeds will be used to fund a dividend to sponsors.

Anchor Glass is a Tampa, Fla., manufacturer of glass containers for the beer, food, beverage and liquor markets.

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