Windstream markets $2.5 billion seven- and 10-year notes

By Paul Deckelman

New York, June 16 - Windstream Corp. was heard by high-yield syndicate sources Friday to be ready to start marketing a $2.503 billion two-part offering of seven- and 10-year senior notes.

The new Little Rock, Ark.-based telecommunications company - being formed as the result of a soon-to-be completed acquisition transaction between two established telecom players - will begin a roadshow for the deal on Monday, the sources said, with an investor call to potential buyers slated for Wednesday. Pricing is expected to take place at the beginning of the June 26 week.

Windstream is selling $800 million of seven-year notes that are non-callable for life, as well as $1.703 billion of 10-year notes, which are non-callable for the first five years.

While primaryside players were pretty certain as far back as the beginning part of the month that the company would be selling 10-year bonds as part of the deal, they were less certain about the other portion. Market talk only indicated that it would be a shorter tenor, with no news about the seven-year maturity emerging until Friday.

The bonds will be sold under Rule 144A via an underwriting syndicate led by Merrill Lynch & Co. and JP Morgan, the joint bookrunning managers. Banc of America Securities, Citigroup, Wachovia Securities and Barclays Capital will be co-managers on the seven-year notes, but not on the 10-years.

Moody's Investors Service has assigned the new deal a B3 rating with a stable outlook. Standard & Poor's rates the deal at BB-.

Proceeds of the bond issue, along with $2.9 billion in new senior secured credit facilities, will be used to help fund the acquisition by Irving, Tex.-based Valor Communications Group Inc. of Alltel Corp. Inc.'s landline telecom business, which is being spun off by Alltel so the latter company can re-position itself as a pure-play wireless telecom provider.

The $9.1 billion transaction was announced by the two companies in early December, and includes the assumption by Valor of approximately $4.2 billion in additional debt. Valor shareholders will vote on the deal at a special meeting to be held in New York on June 27. After the closing of the merger, which is expected right around mid-year, the combined company's name will be changed to Windstream Corp.

With $5.4 billion in total net debt, the new merged company will be levered at approximately 3.2 times net debt to operating income before depreciation and amortization, substantially lower than Valor's current leverage ratio of approximately 4 times debt to OIBDA.

Windstream will provide voice, broadband and entertainment services to customers in 16 states. The company will have approximately 3.4 million access lines and about $3.4 billion in annual revenues.

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