| NEW YORK
NEW YORK Dec 4 AT&T is shocking BellSouth
bond investors with news of an under-the-radar filing
that transfers ownership of AT&T Mobility from
BellSouth to its parent company, AT&T, sources told Thomson
When AT&T acquired BellSouth in 2006, AT&T also acquired
BellSouth's 40 percent economic interest in AT&T Mobility LLC,
formerly Cingular Wireless LLC. The remaining 60 percent of
Mobility was owned by AT&T Inc.
With the transfer of ownership of BellSouth's 40 percent
stake in AT&T Mobility, a significant portion of BellSouth
assets will be stripped away from debt investors. BellSouth
bondholders will no longer have AT&T Mobility assets supporting
"I'm not happy about it," said one BellSouth investor. "It
makes BellSouth bonds the same as any other OpCo."
In December 2010, AT&T filed an application under the
Universal Licensing System, under the FCC, requesting pro forma
transfer of control of AWACS Inc and its wireless licenses from
New Southwestern Bell Mobile Systems Inc to AT&T Teleholdings
Inc. The filing has been consummated, according to the ULS
"As part of an internal corporate restructuring that is
planned for December 31, 2010, NSBMS will merge into AWACS,
leaving Teleholdings as the direct parent of AWACS, which will
be the surviving Entity," an attachment in the ULS application
said. The ULS is the database and application filing system for
most wireless radio services, according to the website.
Sources note that the ownership change allows AT&T to sell
off BellSouth wireline assets, without concurrently any losing
ownership of the wireless business previously under BellSouth's
A spokesperson for AT&T declined to comment.
While analysts say the ownership transfer is allowed under
the bond indenture, investors were blindsided by the lack of
transparency surrounding the transfer, as the company had not
previously indicated a change in ownership structure would take
place, sources said.
Investors are surprised that the transfer is occurring,
given that BellSouth bondholders will be subordinated, and will
no longer have 100 percent draw to the wireless assets in terms
of cash flows.
"They stripped away a big portion of the assets without
letting anyone know," said one senior credit analyst.
However, the effect on BellSouth bonds in terms of pricing is
"Insurance companies may not be looking to move the bonds at
this point in the year," said one market strategist, adding that
the bonds may also face liquidity concerns.
On November 30, AT&T completed an exchange offer in which
$1.6 billion BellSouth bondholders tendered their bonds, and
exchanged them for new AT&T senior notes. However, over $6.5
billion of debt will remain at BellSouth following the exchange
offer. Only about $1 billion of this debt, the BellSouth 4.020
percent senior notes due 2021, carries an unconditional
guarantee by AT&T. The remaining bonds are supported only by