Several large pieces of Allegiance Telecom bank debt have traded over the last two weeks as the company's bank debt levels ticked up into the low 90s on market speculation that a strategic buyer could be interested in the company's assets. "We are reviewing many opportunities in our reorganization process," said Andrew Albrecht, v.p. of investor relations, declining to comment on any potential suitors.
Traders said first CoBank sold a $20 million piece of Allegiance's bank debt in the 85-86 range. Dresdner Bank then sold a large piece around the 901/2 level last week, according to traders. Finally, an undisclosed seller auctioned $20 million of the paper in the 921/2-93 context later in the week. The buyers of the paper could not be determined. An official at CoBank declined to comment. An official at Dresdner referred calls to a spokesperson, who did not return calls by press time.
Level 3 Communications was one of the companies that market players suggested is poised to make a purchase. "It makes sense. They need assets that [Allegiance] has," said one source. As a competitive local exchange carrier, Allegiance has local assets, such as 5ESS switches, that can be used to complete the networks of other telecom companies, he explained. A Level 3 spokesman did not return calls by press time. Buyer speculation has contributed to the rise in Allegiance's loan, which has climbed from the mid-to-high 60s since the company filed for bankruptcy in May. Moreover, over the last year the price for the loan has more than doubled with the paper being quoted in the 37-42 range last October, according to LoanX.
Last week, Allegiance received another postponement to the hearing that will determine whether the company will be granted an additional period of exclusivity. The hearing is now scheduled to be held on Oct. 21, noted Albrecht. Market players speculate the company may come out with a plan of reorganization soon because Allegiance has already received multiple postponements to this hearing. --Molly Jackson Sell