By Paul Deckelman
New York, June 8 - Qwest Communications International Inc. priced an upsized $1.75 billion three-part offering of senior notes Wednesday, high-yield primary market sources said.
The first tranche, of $400 million 10-year notes issued by the company's regulated operating subsidiary, Qwest Corp., priced at par to yield 7 5/8%, in line with pre-deal market price talk.
The second tranche, of $750 million eight-year floating-rate notes, also issued by Qwest Corp., priced at par to yield 325 basis points over the 3-month Libor rate, also in line with price talk. Both tranches are non-callable for the life of the bonds, and both carry ratings of Ba3 from Moody's Investors Service and BB- from Standard & Poor's.
The third tranche, of $600 million notes issued by the parent Qwest Communications International, was structured as an add-on to the company's existing $500 million of 7½% senior unsecured notes due 2014, which were sold in January 2004. The add-on issue priced at 91.827 to yield 8 7/8%, at the top end of price talk envisioning a yield between 100 and 125 basis points off the Qwest Corp 10-year issue, or 8 5/8% to 8 7/8%. Those bonds have the same call structure and covenants as the existing 7½% bonds, and like them, are rated B3 by Moody's and B by S&P.
The quickly shopped Rule 144A offering from the Denver-based regional Bell telecommunications operating company - which was upsized to $1.75 billion from $1.25 billion originally - was brought to market by joint bookrunning managers Merrill Lynch and Deutsche Bank Securities, along with co-managers Banc of America Securities and UBS Investment Bank, just a day after the company announced its plans to sell the new bonds and use the proceeds to retire $904.103 million of existing bond debt via tender offers - $504.103 million of Qwest Services Corp. 13% senior subordinated secured notes due 2007, $150 million of Qwest Corp. 6 1/8% notes slated to come due on Nov. 15 and $250 million of Qwest Corp. 6 5/8% notes scheduled to mature on Sept. 15.
Qwest on Wednesday announced plans to use most of the proceeds that would remain after the tender offer to pay down $750 million of the $1.25 billion of Qwest Corp. term loan debt due 2007. Under its terms, that debt is callable starting on Friday.
| Issuer: | Qwest Communications International Inc. and Qwest Corp.
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| Total amount: | $1.75 billion (upsized from $1.25 billion)
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| Bookrunners: | Merrill Lynch and Deutsche Bank Securities
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| Co-managers: | Banc of America Securities and UBS Investment Bank
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| Settlement: | June 17 (T+7)
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| Tranche 1
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| Issuer: | Qwest Corp.
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| Security description: | Senior notes
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| Amount: | $400 million
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| Maturity: | June 15, 2015
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| Coupon: | 7 5/8%
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| Price: | Par
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| Yield: | 7 5/8%
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| Spread: | 369 basis points over Treasuries
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| Price talk: | 7 5/8%
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| Call protection: | Non-callable
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| Equity clawback: | None
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| Ratings: | Moody's: Ba3
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| S&P: BB-
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| Tranche 2
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| Issuer: | Qwest Corp.
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| Security description: | Senior floating-rate notes
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| Amount: | $750 million
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| Maturity: | June 15, 2013
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| Coupon: | 3-month Libor + 325 basis points
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| Price: | Par
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| Yield: | 3-month Libor + 325 basis points
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| Price talk: | 3-month Libor + 325 basis points
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| Call protection: | Non-callable
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| Equity Clawback: | None
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| Ratings: | Moody's: Ba3
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| S&P: BB-
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| Tranche 3
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| Issuer: | Qwest Communications International Inc.
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| Security description: | Senior add-on notes to existing issue
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| Amount: | $600 million
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| Maturity: | Feb. 15, 2014
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| Coupon: | 7 ½%
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| Price: | 91.827
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| Yield: | 8 7/8%
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| Spread: | 498 basis points
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| Price talk: | 100 to 125 basis points off Qwest Corp. 10-year (i.e. 8 5/8% to 8 7/8%)
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| Call structure: | Non-callable till Feb. 15, 2009, then at 103.75; callable from Feb. 15, 2010 at 102.5; callable from Feb. 15, 2011 at 101.25; callable from Feb. 15, 2012 and thereafter at par
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| Equity clawback: | For 35% of issue at 107.5 till Feb. 15, 2007
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| Ratings: | Moody's: B3
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| S&P: B
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