Economy could sink Verizon-Alltel deal

Financial analysts are increasingly worried that, despite protestations to the contrary earlier this week, Verizon Wireless may not be so hot to trot to acquire Alltel in the face of an increasingly ugly economy and Alltel's somewhat precarious debt situation.

The biggest concern, in money talk, is that the cost of protecting Alltel's bonds from default has doubled. Credit-default swaps are now 226.8 basis points compared to 113.4 points Sept. 25 and 91.6 points when Verizon agreed to buy the carrier June 6. Credit-default swaps are financial speculation on whether a company can repay its debt. Alltel has about $7.7 billion in bank loans due this year that it has to pay or refinance in a credit market that shows no signs of being able to do so even with a $700 billion government bailout.

On a positive note, Verizon still has enough cash to complete the transaction, according to Chris Diceman, a credit analyst with Dominion Bonding Rating Service in Toronto.

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