Qwest investors unmoved by asset sale; Ceradyne sets timing

By Sara Rosenberg

New York, July 2 - Qwest Communications International Inc.'s term loan A was quoted at 104 bid, 104¼ offered Friday, pretty much unchanged from previous levels as bank debt holders seemed uninspired by the company's latest asset sale news, according to a trader.

"If anything it's probably expected. This is not a lot of cash relative to the amount of debt they have," the trader said.

Late in the day Thursday, Qwest announced that Verizon Wireless would acquire Qwest's PCS licenses and related wireless network assets in 14 states for about $418 million in cash. The transaction, which is contingent upon federal regulatory approval, is expected to close by year-end or early 2005.

"The sale completes our shift from a network-centric wireless provider to a more customer-focused operation that is designed to deliver exceptional value and service to customers," said Oren G. Shaffer, Qwest vice chairman and chief financial officer, in a company news release. "The monetization of the network assets further improves our liquidity."

Qwest is a Denver provider of voice, video and data services.

Ceradyne launch next week

Timing surfaced on Ceradyne Inc.'s $160 million senior secured credit facility with the deal expected to launch via a bank meeting next week, according to a market source. Wachovia Capital Markets, LLC is the led bank on the deal.

The facility consists of a $50 million revolver and a $110 million seven-year term loan B.

According to company slides shown during a conference call Thursday, it is estimated that the revolver will carry an interest rate of Libor plus 200 basis points and the term loan will carry an interest rate of Libor plus 250 basis points.

However, the estimated pricing revealed by the company may be slightly higher than pricing that the syndicate will end up coming out with at launch, the source said, adding that official price talk is not being revealed at this time.

Proceeds from the credit facility along with cash will be used to help fund the acquisition of ESK Ceramics, which is expected to close in the third quarter.

Under the acquisition agreement, Ceradyne will purchase the Germany-based industrial technical ceramic manufacturer, for approximately €111.4 million, or about $136 million, in cash payable at closing.

On Thursday, Moody's Investors Service assigned its Ba3 rating to the deal with a speculative grade liquidity rating of SGL-2 and a stable outlook.

"Ratings reflect Ceradyne's small revenue base and integration risks associated with the acquisition of ESK. The ratings also consider the company's modest pro forma debt levels, strong interest coverage resulting from relatively robust free cash flows, and the company's leading market position in its military supplier segment amidst the current strong military contracting environment," Moody's said.

Pro forma debt will represent about 2.3 times estimated last-12-months June 2004 EBITDA, and 55% of total capital, Moody's added.

Ceradyne is a Costa Mesa, Calif., developer, manufacturer and marketer of advanced technical ceramic products and components for defense, industrial, automotive/diesel and commercial applications.

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