Qwest Communications International Inc. priced $1.1 billion of 20-year convertible senior notes as part of a broader restructuring of $3 billion in debt, according to several reports.
The company ultimately expects to cut its interest expense by as much as $300 million, according to The Rocky Mountain News.
The notes bear an interest rate of 3.50 percent and were priced at a premium of 30 percent over the company’s common stock’s recent closing price of $4.54.
Qwest plans to use the net proceeds from the offering — which had been upsized by $100 million — and other cash on hand to retire a series of expensive debt issues. The Senior Subordinated Secured Notes issued were priced at 13 percent (due in 2007), 13.50 percent (due in 2010), and 14 percent (due in 2014).
Any remaining net proceeds will be used for other general corporate purposes and potential future refinancing of indebtedness, the company said.
“This transaction is a step function in the company’s transformation,” Oren G. Shaffer, Qwest vice chairman and CFO, said in a press release. “It accelerates our operational momentum by significantly reducing interest expense and moving us closer to profitability.”
Shaffer told the Associated Press that the company’s overall refinancing plan could help it become profitable for the first time since 2000. “This one just seemed to go very well in generalÂÂ. All the markets seemed to like it,” he said.
Qwest treasurer Janet Cooper told the wire service that Moody’s Investors Service increased its ratings on all Qwest debt by one to two notches.
Goldman, Sachs & Co. was the book runner for the offering. Credit Suisse First Boston and Morgan Stanley were the co-lead managers, while Citigroup, Lehman Brothers, and Wachovia Securities were co-managers.