Does a spin-off from a big-name firm have an inherent advantage over other similarly rated issuers when it comes to raising money?

Not always.

Some fledgling firms have used their big-name corporate parents to great advantage in the past, but AT&T Wireless Corp. may get mired in the financial problems plaguing AT&T itself.

Last week, AT&T Wireless announced plans to issue from $4 billion to $5 billion of bonds in five-, 10-, and 30-year tranches. The offering will serve as a major test of the market’s ability to absorb debt from what has been one of its shakiest sectors, wireless telecommunications.

The deal, which will be led by Merrill Lynch and Salomon Smith Barney, will also be one of the largest private (144A) offerings ever to hit the U.S. corporate bond market.

The bonds of the new entity, which has yet to be fully spun off from its parent, will be rated Baa2 by Moody’s Investors Service, the ratings agency announced yesterday, placing it a few notches below the A2 normally given the parent company.

Assuming Standard & Poor’s follows suit with the equivalent triple-B designation, the ratings agencies are placing the new debt squarely at the bottom of the investment-grade spectrum.

The Million Dollar Question

How will the low rating affect AT&T Wireless’ chances at overcoming the market’s weak appetite for telecom bonds?

“That’s the million dollar question,” said one bond trader at a firm that’s not part of the underwriting syndicate.

With the issuer planning to take the offering on the road to investors Feb. 23 through Feb. 27, many investors will undoubtedly be busy taking the market’s temperature before committing to this offering, which is expected to price shortly after the road show.

Investment-grade debt has halted its recent supply-induced downward spiral as of late last week, but traders are quick to point out the telecom sector has continued to weaken relative to U.S. Treasuries.

So if the verdict had to be in today, the consensus is that AT&T will have to pay more than, for example, Noranda, a minerals concern that on Feb. 15 issued $300 million of Baa2/BBB-rated debt priced by at 325 basis points over the 10-year Treasury.

“The market isn’t trading well, and it’s obvious at this point that [AT&T Wireless’s] going to have to issue these wide relative to the rest of the pack,” said the trader.