QWEST Communications International phone book unit, Qwest Dex, plans in October to sell as much as $1 billion (€1.03 billion) of junk bonds to help finance its $7.05 billion takeover by two buyout firms.
Carlyle Group and Welsh, Carson, Anderson & Stowe agreed to pay $2.75 billion in cash for Qwest Dex's eastern US operations and $4.3 billion for its western US operations.
The purchase is the second-largest leveraged buyout after Kohlberg Kravis Roberts 's $31.4 billion purchase of RJ Reynolds Nabisco in 1989.
A $1 billion bond sale could be the largest junk-bond sale since Owens-Brockway Glass Container, a division of Owens-Illinois, sold $1 billion in January.
"A $1 billion high-yield deal is a big deal in any market," said Mr Brendan White, a senior portfolio manager who invests $1.1 billion for Fort Washington Investment Advisors in Cincinnati. "The size of the issue could result in the bond being priced cheaper than it otherwise would be."
Junk bonds have suffered this year from accounting scandals, record defaults and bankruptcies. Junk bond mutual funds have suffered 11 straight weeks of net cash outflows.
Qwest Dex sells advertising in 269 directories in 14 US states, with a circulation of 45 million copies. Its bond sale would be the first of two by the company that could raise nearly $3 billion, a source familiar with the matter said. Qwest Dex might also tap the leveraged loan market for about $3 billion and issue $1 billion of equity, the source said.
Qwest shares traded at $2.60, down 9 cents, yesterday afternoon on the New York Stock Exchange. They have fallen 88 per cent in the last year, from $21.70. - (Reuters)
