Qwest tenders for $3 billion of notes

New York, Nov. 1 - Qwest Communications International Inc. said its Qwest Services Corp. subsidiary has begun a $3 billion cash tender offer for some of its notes.

Qwest Services is offering to buy its $2.232 billion principal amount of 13½% senior subordinated secured notes due 2010, $641 million principal amount of 14% senior subordinated secured notes due 2014 and $52 million principal amount of 13% senior subordinated secured notes due 2007.

The company will pay up to $3 billion in total, excluding accrued interest. If the offer is oversubscribed, Qwest will buy the 13½% notes first, followed by the 14% and lastly the 13% notes.

Pricing per $1,000 principal amount will be based on a yield to the first call date of a spread over a reference security, calculated at 2 p.m. ET on Nov. 15, minus accrued interest up to but excluding the settlement date, minus an early participation payment of $50.00 per $1,000.

For the 13½% notes, the first call date is Nov. 30, 2006, the spread is 50 basis points and the reference security is the 2 7/8% U.S. Treasury due Dec. 15, 2006.

For the 14% notes, the first call date is Nov. 15, 2007, the spread is 50 basis points and the reference security is the 3% U.S. Treasury due Nov. 15, 2007.

For the 13% notes, the first call date is Nov. 30, 2005, the spread is 50 basis points and the reference security is the 1 7/8% U.S. Treasury due Nov. 30, 2005.

Qwest will also pay accrued interest up to but excluding the settlement date.

Holders who tender by the early participation deadline of 5 p.m. ET on Nov. 15 will receive an additional payment of $50.00 per $1,000.

The tender ends at midnight ET on Nov. 30.

Initial settlement for the 13½% notes is expected to be Nov. 16. For the other series it will be no later than the first business day after the expiration.

The Denver-based telecommunications company is also soliciting consents to amend the note indenture to eliminate substantially all of the restrictive covenants and release the collateral that secures the notes, including the collateral that secures Qwest Communications' guarantee of the notes.

Holders cannot tender without delivering consents nor vice versa.

The offer is not subject to a minimum amount of consents.

To make the changes, Qwest needs consents of holders of a majority of the notes, or of 66 2/3% to release the collateral.

If the changes become effective but notes of any series are returned to holders because the offer is oversubscribed, then Qwest will agree to comply with the restrictive covenants in the indenture for the 7½% Senior Notes due 2014 issued by Qwest Communications and guaranteed by Qwest Services.

The offer is subject to various conditions including completion of a $1 billion convertible senior notes offering.

Banc of America Securities LLC (888 292-0070 or call collect 704 388-4813), Goldman, Sachs & Co. (212 357-8664 or 800 828-3182), Lehman Brothers Inc. and UBS Securities LLC are dealer managers and solicitation agents. Global Bondholder Services Corp. is information agent (866 873-7700).

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