Horizon PCS to price $175 million 10-year notes Dec. 4

By Paul A. Harris

St. Louis, Mo., Nov. 27 - Horizon PCS Inc. is expected to price $175 million of 10-year senior notes on Dec. 4, sources told Prospect News Tuesday.

Bookrunner will be Credit Suisse First Boston with Wachovia Securities as joint lead manager and Bear Stearns & Co. and Lehman Brothers as co-managers.

The Rule 144A notes will be non-callable for five years. Two years of interest payments will be placed in an escrow account, a syndicate official said.

Proceeds will be used for general corporate purposes, and to service the escrow account.

"This is a cash-pay security," a syndicate source commented. "There are only a couple affiliates that have cash-pay securities out, and only one that has cash-pay and discount notes, and that's Alamosa (Alamosa PCS Holdings Inc.)"

Horizon PCS said in a filing with the Securities and Exchange Commission Tuesday that is has amended its credit facility in connection with the note offering to allow its operating subsidiaries to make distributions to the parent so that it can in turn make the scheduled interest payments on the notes. Those distributions will only be permitted once the interest escrow is exhausted.

Limits on additional indebtedness and some financial covenants were also amended, Horizon PCS added.

Horizon PCS also said in the SEC filing that it is fully funded under its existing business plan which includes completing a network to cover 6.9 million people and opening 40 retail stores.

The note proceeds will allow Horizon PCS to pursue other opportunities, which may include:

* expanding the coverage within its existing markets to include an additional 1.0 million residents, increasing its coverage to 7.9 million residents or 77% of the total population in its territory. Horizon PCS aims to have 400,000 subscribers, 5% of its total covered residents, by the middle of 2003;

* opening up to 10 more retail stores, for a total of up to 50;

* obtaining additional markets from Sprint PCS; and/or

* expanding the network, if economically feasible, by exercising Horizon PCS' right to build its own network in its markets which are covered by its network services agreement with other operators.

Horizon PCS said existing cash, credit facility availability and proceeds from the notes will be enough to fund network construction, operating losses and working capital until the company becomes EBITDA (earnings before interest, taxation, depreciation and amortization) positive in the third quarter of 2003.

From Oct. 1, 2001 to Dec. 31, 2003, Horizon PCS anticipates needing $218 million of capital, including $112 million for capital spending, $49.4 million in working capital and EBITDA losses and cash interest expense of $56.6 million.

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