By Paul Deckelman
New York, March 26 - New Communications Holdings Inc. priced $3.2 billion of new senior notes (Ba2/BB) Friday in a deal which had been both massively upsized and restructured to make it a four-part offering, high yield syndicate sources said. The transaction is connected with a major asset purchase by familiar junk market name Frontier Communications Corp.
The offering was increased to $3.2 billion from the original $2 billion announced Wednesday by Frontier, a Stamford, Conn.-based telecommunications company. Upon being upsized, the deal was broken into four tranches with the addition of five-year and 12-year notes to the originally announced seven-year and 10-year paper.
The company priced $500 million of 7 7/8% notes due 2015, $1.1 billion of 8¼% notes due 2017, $1.1 billion of 8½% notes due 2020 and $500 million of 8¾% notes due 2022. All four tranches priced at par.
The new bonds priced in line with guidance issued late Thursday, envisioning the 2017 bonds yielding 8¼% while the 10-year issue and the 12-year issue would yield 25 basis points and 50 bps above that, respectively. The five-year tranche, meantime, came right in the middle of guidance projecting a yield between 25 bps and 50 bps tighter than the seven-years.
After their Friday afternoon pricing, the bonds broke into the secondary market, and were seen to have quickly moved to levels above 102 bid for the five- and seven-year issues and above 101 bid for the 10- and 12-year paper.
The bonds - all of them non-callable for the life of the issue apart from a make-whole call at 50 bps over Treasuries - are being sold under Rule 144A and Regulation S with registration rights. They carry covenants substantially similar to those of Frontier's $600 million of 8 1/8% notes due 2018, which were sold last September. Among the provisions are a change-of-control put at 101% of principal plus accrued interest.
The deal was brought to market by joint bookrunning managers J.P. Morgan Securities Inc. and Credit Suisse Securities (USA) LLC, as well as Barclays Capital Inc., Bank of America Merrill Lynch, Citigroup Global Markets, Inc., Morgan Stanley & Co. Inc., Deutsche Bank Securities, Inc. and RBS Securities Inc.
In announcing the upcoming mega-deal on Wednesday, Frontier, which used to issue bonds under its former corporate name, Citizens Communications Corp., said that New Communications Holdings, a subsidiary of New York-based telecom giant Verizon Communications Inc., would sell the bonds, with the proceeds to be used to facilitate Frontier's purchase from Verizon of the latter's landline business in 14 states - some 4.8 million landlines leased to residential and small business customers. That complex $8.6 billion deal was announced last May, but must still be approved by federal authorities as well as utility regulators in those states.
New Communications was formed for the purpose of holding those Verizon assets.
Frontier said that the proceeds from the bond offering will be deposited into an escrow account, from which New Communications will then fund a portion of a special cash payment to Verizon in connection with the deal, while New Communications will ultimately be merged with and into Frontier, giving the latter company control of the landline assets and operations.
| Issuer: | New Communications Holdings Inc. (To be merged with and into Frontier Communications Corp.)
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| Issue: | Senior notes
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| Amount: | $3.2 billion (upsized from $2 billion)
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| Proceeds: | $3.2 billion
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| Bookrunners: | J.P. Morgan Securities Inc., Credit Suisse Securities (USA) LLC., Barclays Capital Inc., Bank of America Merrill Lynch, Citigroup Global Markets, Inc., Morgan Stanley & Co. Inc., Deutsche Bank Securities, Inc. and RBS Securities Inc.
|
| Call features: | Non-callable for life of issue, other than make-whole call at T+50 bps
|
| Change of control: | Put at 101% of principal plus accrued interest
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| Trade date: | March 26 |
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| Settlement date: | April 12
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| Ratings: | Moody's: Ba2
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| Standard & Poor's: BB
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| Distribution: | Rule 144A/Reglation S, with registration rights |
|
| Marketing: | Roadshow March 24-26
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|
|
| Five-year notes
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| Amount: | $500 million
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| Proceeds: | $500 million
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| Maturity: | April 15, 2015
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| Coupon: | 7 7/8%
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| Price: | Par
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| Yield: | 7 7/8%
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| Spread: | 516 basis points
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| Price talk: | 25-50 bps tighter than seven-year yield
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|
|
| Seven-year notes
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| Amount: | $1.1 billion
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| Proceeds: | $1.1 billion
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| Maturity: | April 15, 2017
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| Coupon: | 8¼%
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| Price: | Par
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| Yield: | 8¼%
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| Spread: | 492 basis points
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| Price talk: | 8¼%
|
|
|
| Ten-year notes
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| Amount: | $1.1 billion
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| Proceeds: | $1.1 billion
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| Maturity: | April 15, 2020
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| Coupon: | 8½%
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| Price: | Par
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| Yield: | 8½%
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| Spread: | 464 basis points
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| Price talk: | Seven-year yield plus 25 bps
|
|
|
| Twelve-year notes
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| Amount: | $500 million
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| Proceeds: | $500 million
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| Maturity: | April 15, 2022
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| Coupon: | 8¾%
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| Price: | Par
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| Yield: | 8¾%
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| Spread: | 459 basis points
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| Price talk: | Seven-year yield plus 50 bps
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