Qwest receives tenders for $2.904 billion of notes, ups size to all notes tendered, sets pricing

New York, Nov. 16 - Qwest Communications International Inc. said its Qwest Services Corp. received tenders for $2.904 billion of notes or 99.2% of the principal amount of the three series of debt covered by the offer.

Qwest also said it is increasing the size of the tender to cover all the outstanding notes in the three series, removing the early cap under which it would spend up to $3 billion.

In addition, the company announced pricing.

By the early participation deadline, holders had tendered $2.211 billion or 99% of Qwest Services' $2.232 billion principal amount of 13½% senior subordinated secured notes due 2010, $640.6 million or 100% of its $641 million principal amount of 14% senior subordinated secured notes due 2014 and $52.1 million or 99.3% of its approximately $52 million principal amount of 13% senior subordinated secured notes due 2007.

Initial settlement was scheduled for Wednesday with a total payment of $3.398 billion.

The response means Qwest has the necessary consents to amend the note indentures 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. To make the changes, Qwest needed consents of holders of a majority of the notes, or of 66 2/3% to release the collateral.

Pricing was fixed at 2 p.m. ET on Nov. 15. For the 13½% notes, Qwest will pay $1,102.30 per $1,000 principal amount, for the 14% notes it will pay $1,189.66 and for the 13% notes it will pay $1,021.13. All prices include a $50 per $1,000 early participation payment that will only be made to holders who tendered by the early participation deadline of 5 p.m. ET on Nov. 15.

"This tender enables us to significantly reduce interest expense by over $300 million annually," said Janet K. Cooper, Qwest senior vice president and treasurer, in a news release. "This improves the company's leverage and advances our progress toward investment grade."

The Denver-based telecommunications company announced the tender on Nov. 1. At that time it said it would pay up to $3 billion in total, excluding accrued interest, although that limit has now been removed so that the offer covers all the notes in the three series. Under the original terms, had the offer been oversubscribed, Qwest would have bought 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, 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 will receive an additional payment of $50.00 per $1,000.

The tender ends at midnight ET on Nov. 30.

Holders cannot tender without delivering consents or vice versa.

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

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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