Western Wireless firms on definite merger news; Ames, General Nutrition ready to price

By Paul Deckelman and Paul A. Harris

New York, Jan. 10 - Western Wireless Corp.'s bonds - which had risen last week amid market buzz about merger talks involving the Bellevue, Wash,-based rural cellular provider - firmed a bit more on Monday as Western Wireless officially announced its planned acquisition for $6 billion, including debt assumption, by rival rural cellular operator Alltel Corp.

In the primary sphere, the subdued tone that pervaded most of the Jan. 3 week carried over into Monday's session, which saw no new issues price.

However, late in the day one new roadshow start was announced.

Carriage Services, Inc., the Houston death care company, will undertake an investor roadshow beginning Tuesday for its $130 million of 10-year non-call-five senior notes, which are expected to price on Wednesday, Jan. 19.

Merrill Lynch & Co. and Banc of America Securities will be joint bookrunners for the debt refinancing deal.

And price talk was heard on a pair of dollar-denominated offerings - one a fixed-rate deal and the other a floater - that appear headed for Tuesday pricings.

Price talk of three-month Libor plus 400 to 425 basis points emerged Monday on Camp Hill, Pa. garden tools company Ames True Temper's $150 million of seven-year non-call-two senior floating-rate notes (B3/B), via Banc of America Securities and Credit Suisse First Boston.

Meanwhile price talk is for a yield in the 8½% area on Pittsburgh, Pa. nutritional supplements company General Nutrition Centers Inc.'s $150 million of six-year non-call-three senior notes (B3/B-), coming to market via Lehman Brothers.

Both of these Pennsylvania companies will use the proceeds from their planned Tuesday deals to address bank debt.

No uptick since FOMC minutes

Sources continued to make reference to the release last Tuesday of the minutes from the Federal Open Market Committee's Dec. 14 meeting.

Those minutes, sources contend, find the Fed shifting from a previously neutral stance to one where it is concerned about inflation.

In them the FOMC commented: "The current level of the real funds rate target remained below the level it most likely would need to reach to keep inflation stable and output at its potential."

Further along it added "With the economic expansion more firmly entrenched, cost and price pressures were likely to become a clearer intermediate-term risk to sustained good economic performance absent further reduction of accommodation."

One primary market source, an official from a high-yield syndicate desk, told Prospect News that the weakness which trailed the release of those minutes last Tuesday appeared to have persisted into Monday trading.

However, the source said, there is no evidence as yet that the apparent shift in the Fed's bias has impacted the primary market.

"It's too early to say whether it will have any impact," the syndicate official said.

"Last week we had inflows [$138.7 million for the week to Jan. 5, as reported by AMG Data Services], which reversed the trend of the previous six weeks.

"Also a few deals have gotten done," the sell-sider added. "Right now things are coming, if not tight, at least at the right levels.

"Ames True Temper and GNC [see price talk above] seem fairly priced, if not slightly aggressive.

"So we don't really see any sign that the market is backing up.

"If we see any of these deals downsize, or come wide of price talk, that might be an indication."

"A new reality"

Recapping the Jan. 3 week's action in Bond Market Roundup, Citigroup's U.S. fixed income research organ, analyst John Fenn also cited the above-mentioned FOMC minutes.

"The high-yield market got off to a bit of a stumble as it left the gate on its voyage through 2005," Fenn wrote, in the issue published last Friday.

"There seemed to be a lot going on and the market did not react very favorably. The early week activity indicated that there was still going to be some demand for paper, as the buyers must have returned to the office before the sellers. Then, in a prime example of the new and improved Greenspan transparency, the Fed released the minutes of the Dec. 14 meeting, roughly a month or so ahead of when they would have previously been released. That is to say, the minutes are now public before they actually become ancient history.

"Apparently, the market did not like what it saw, as there was discussion that the Fed may be at this rate-hiking thing longer than the market might have been expecting."

Fenn added: "The good news is that while [high-yield] prices were clearly softer after Treasuries sold off some, it appeared to be a very Street-driven case of marking things down to reflect the new reality. In addition, we saw softness in some of the CCC-rated names that had performed so well over the course of the fourth quarter. In some cases, we can point to profit taking and it is certainly the case that some mangers are practicing a little early-year clearing to make room for the new presents that the capital markets may bring. However, our concern is that the seeds of last year's January sell off were sown from the selling of CCC names that had raced too hard, too fast."

Western Wireless up again

Western Wireless's 9¼% notes due 2013 were being quoted as high as 117 bid right out of the chute Monday morning, well up from their closing levels around the 114.5 area on Friday, as the company and suitor Alltel officially confirmed what everyone and his brother had been speculating about over several sessions last week.

That speculation - that Alltel would acquire Western Wireless for somewhere around $4 billion - had pushed those Western Wireless bonds as high as the 115-116 area, well up from around 108 before this became a hot market topic. The bonds had retreated slightly from those peak levels by Friday afternoon, when there was still no official confirmation by either company. Once the confirmation came Monday morning, however, the Western Wireless bonds moved on up. Although they ended off the peak level, they still closed out trading up 1½ points or so to around the 116 area.

Those bonds are trading at about the level at which they would be taken out under a make-whole call in effect through 2008. On a morning conference call, executives of Alltel said the company expects to refinance Western Wireless' roughly $2 billion of debt when the merger deal closes around mid-year (see related story elsewhere in this issue).

The combination of Alltel and Western Wireless, both of which provide cellular phone service to smaller markets in the vast, sparsely populated rural areas of the Midwest and western states, promises to create the fifth-largest U.S. wireless operator, after Cingular Wireless, Verizon Wireless, the soon-to-be combined Sprint Wireless and Nextel Communications Inc., and T-Mobile USA.

Small, rural cellphone companies up

Speculation about such a combination helped push up the bonds of smaller rural and small market-oriented cellular companies last week by spurring consolidation talk. On Monday, many of those bonds - which had been unchanged to slightly lower on Friday - were back on the rise.

A market source pronounced that Rural Cellular Corp. was "up a little, maybe about half a point," with its 6.99% notes due 2010 firming to 104.5 while its 8½% notes due 2012, 9¾% notes due 2010 and 11 3/8% notes due 2010 were all likewise up half a point at 106.75, 95.5 and 82 bid, respectively.

Another gainer was American Cellular Corp., whose 9½% notes due 2009 and 10% notes due 2011 were both observed half a point higher at 88.5. Notes of the company's corporate parent, Dobson Communications Corp., were also seen higher, its 8 7/8% notes due 2013 and 10 7/8% notes due 2010 both half a point higher, at 72 bid and 80.25 bid, respectively, while 12¼% notes due 2008 and 13% notes due 2009 were both a quarter point better, each at 45.75

Dobson's 13% senior exchangeable preferreds meantime shot up 45 points to 555 on Monday and a sellside dealer said there were two huge trades, and possibly just one buyer. The 12¼% senior exchangeable preferreds, however, were unmoved from Friday at 515, he said.

Dobson shares closed Monday off a penny at $1.80.

Kim Noland, an analyst at GimmeCredit, in a report Monday pointed out that Dobson and other rural wireless providers lowered guidance in 2004 because of significant losses of roaming revenue, partly because of the merger of Cingular and AT&T Wireless. But she added that renegotiations in 2005 of roaming agreements with Cingular, even at a lower rate, could be a positive catalyst for Dobson.

Hollywood Entertainment up

Outside of the rural wireless telecom names, M&A news was heard from Hollywood Entertainment Corp., which announced that it was accepting an $850 million acquisition offer from smaller rival Movie Gallery Inc. That offer includes the assumption of $350 million of Hollywood debt by Movie Gallery, including its 9 5/8% notes due 2011.

Those bonds were seen up slightly in response to the news, quoted at 107.5, a gain of not quite two points.

That's still well below the lofty levels around 114 that those bonds had occupied early last year, when Hollywood announced that it had agreed to a $14 per share buyout deal to take the company private, with chairman Mark Wattles teaming up with Leonard Green Partners, a Los Angeles buyout specialist.

However, by mid-year, Hollywood announced that Green was unlikely to be able to line up the financing for the deal, and the bonds dropped back to the level they had held before the original announcement, in the 106-107 range. Even a later revival of that deal in the fall, with somewhat less generous terms, and the news that both Movie Gallery and Hollywood's larger rival, Blockbuster Inc. had made offers for the Portland, Ore.-based movie and videogame rental chain, failed to get the bonds back up to their highs. Blockbuster, which was last offering $11.50 per share for Hollywood, had threatened to mount a hostile takeover if Hollywood refused to negotiate. Still to be seen is whether Dallas-based Blockbuster will want to now raise its bid to trump Movie Gallery's $13.25 per share offer.

Blockbuster's 9% notes due 2012 were up a quarter point Monday at par bid.

Bally gives up some gains

Bally Total Fitness Holding Corp., whose bonds had shot up several points late Friday on speculation that the underperforming Chicago-based fitness club operator might sell a large stake in the company to several investment firms, was seen backing off from the levels it hit Friday, with its 9 7/8% notes due 2007 seen down a quarter point at 89.75 bid, while its 10½% notes due 2011 were half a point lower at 102.5. At another desk the 9 7/8% notes were quoted down a point at 90.

On Friday, TheDeal.com had reported that Bally was in talks to sell as much as a 40% stake in the problem-plagued company to a troika of Tennenbaum Capital Partners LLC, a Santa Monica, Calif.-based merchant bank - also a large Bally bondholder - and private equity firms Apollo Management LP and Texas Pacific, and said that the deal could be valued at about $125 million. Citing unidentified "sources close the situation," the internet news service also said that Tennenbaum could seek to execute a debt-for-equity swap as part of the transaction. There was no further word Monday on the possible deal.

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