Horizon PCS deal draws market's attention for good timing, low rating

By Paul A. Harris

St. Louis, Mo., Dec. 5 - The successful pricing of a low-rated telecom deal by Horizon PCS, Inc. late Monday set the high yield primary market buzzing Tuesday and Wednesday.

Although the $175 million deal priced at the wide end of talk with a yield of 13¾%, syndicate officials noted that the yield was much lower than the company would have had to pay even just three months, if it had been able to do the deal at all.

And Horizon's pricing soon after offerings by Nextel Partners, Inc. and Triton PCS Inc. started some wondering if the telecom sector is poised for a comeback.

Some syndicate officials noted that Horizon's Caa1/CCC rating stands about as far out along the credit spectrum as the primary has seen in post-September transactions. Others noted that in bringing the credit now, into a cash-heavy market, Horizon's (and by extension dealrunner Credit Suisse First Boston's) timing was impeccable.

"That probably would not have come at any other time but this time," one sell-side source, not connected to the syndicate, commented Wednesday.

"You're going to have to pay, continually, for that triple-hook rating," the source continued, alluding to the CCC rating that Standard & Poor's assigned to the Horizon deal.

"That being said, if you can stand 13¾% or 14%, then the market's open for you," the source continued. "That 13¾% three months ago would probably have been 16% or 17%. So for Horizon I think that's a good trade. It came a little wider than where they thought it was going to come. But it's got six Cs on the damn thing. And it still gets priced."

A source from the Horizon syndicate, considering the above commentary, agreed that the company got a good deal.

"Personally, I don't think this company could have come to market three months ago," the syndicate source said.

Horizon's credit rating is just one notch below the B3/CCC+ of Nextel Partners' $225 million of eight-year notes, which priced at a discount on Nov. 27 to yield 13 7/8%.

The sell-side official quoted first in this story wondered whether the pricings of the two similar deals portends a re-emergence of telecom credits.

"That whole wireless thing is starting to draw attention again, I won't say 'starting to take off.' We'll see what happens. Two years ago wireless and landline was 40% of our market.

"You'd be hard pressed to say it's greater than 5% of the market this year."

End

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