US telco CenturyLink is looking to sell US$500m of 6.875% notes due 2054, via its wholly-owned subsidiary Qwest Corporation, to repay some existing debt.
The underwriters of the offering have the option to acquire up to an extra US$75m of notes to cover…
US telco CenturyLink is looking to sell US$500m of 6.875% notes due 2054, via its wholly-owned subsidiary Qwest Corporation, to repay some existing debt.
The underwriters of the offering have the option to acquire up to an extra US$75m of notes to cover any over-allotments.
Joint bookrunning managers for the offering are Merrill Lynch, Pierce, Fenner & Smith, Morgan Stanley, UBS and Wells Fargo.
Qwest plans to apply to list the notes on the New York Stock Exchange. If successful, it expects they will begin trading 30 days after the initial issuance.
The subsidiary will use the proceeds, together with available cash or additional borrowing from CenturyLink or an affiliate, to repay at maturity all US$600m of 7.5% notes due 1 October 2014, including interest of about US$23m.
Fitch, which has assigned the proposed offering a BBB- rating, noted that Qwest intends to borrow US$100m from affiliated lenders.
Explaining its rationale for the rating, the agency said it expects CenturyLink to show steady improvement in its revenue profile over the next couple of years, mainly from high-speed data, advanced business services, as well as managed hosting and cloud computing services.
The rating also takes into account the relatively lower leverage of Qwest and its debt issues’ senior position in the capital structure compared with CenturyLink’s senior unsecured debt.
CenturyLink, which posted total debt of US$21bn as of 30 June, gains financial flexibility from a US$2bn revolving credit facility maturing in April 2017, Fitch said, noting that about US$1.6bn of this was available at the end of H1. In addition, the telco has a US$160m uncommitted revolving letter of credit facility.
The new issuance is expected to close on 29 September.
Earlier this month, Bloomberg reported that CenturyLink was looking to acquire cloud computing provider Rackspace, which would better enable it to stand up to competition from the likes of Amazon, Microsoft and Google.
However, deals talks with Rackspace, which has a market capitalisation of about US$5.3bn, might collapse on valuation, the report quoted an analyst as saying.
CenturyLink provides data, voice and managed services in local, national and select international markets through its fibre optic network and multiple data centres for businesses and consumers.
