CenturyLink Starts, Stops Refinancing Offer

October 2nd, 2012 by · 1 Comment

Amidst the recent rumors that it is bidding for TW Telecom (NASDAQ:TWTC, news, filings), CenturyLink (NYSE:CTL, news, filings) added a bit of confusion as it pump faked the debt markets yesterday.

In the morning, they kicked off a debt tender offer with a concurrent debt offering. The move would have bought back up to $800M of its  7.125% notes due 2018 at a premium, paying for it with new 10 and 30 year fixed-rate senior notes. Some of the hoped for proceeds would also go toward a previously announced redemption of 8% notes due 2015 later this month.

But by the end of the day, CenturyLink yanked the concurrent offers back in citing market conditions. They'll still be redeeming the 8% notes due 2015, but will be using their revolving credit facility to fun it.

There's been quite a bit of refinancing going on lately, taking advantage of a window in the debt markets. For example, Level 3 (who never misses such a window) refinanced $1.2B worth of term loans yesterday, reducing its interest by 100 basis points.

Perhaps CenturyLink just couldn't get the rate it thought it was going to get. However, might it also be possible that they will need to raise substantial funds for M&A in the near future? They might not want to waste their current financial dry powder unnecessarily just now if they will soon need to raise $5B or more to pay for tw telecom, for instance. Both stocks seemed to take the rumors seriously yesterday, with TWTC rising 5% and CTL dropping almost 3%.

Of course, it could also have to do with yesterday's news of a potential strike. Union workers from what used to be Qwest across 13 states out west have voted to authorize one if the CWA is unable to reach a deal. Too early to tell if such a thing will actually come to pass, but the uncertainty surely can't help. CenturyLink seems to have a full plate at the moment.

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Categories: Financials · ILECs, PTTs

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  • en_ron_hubbard says:

    Rob,

    It seems reasonable to assume that the merger whispers were the primary reason the deal was pulled. From the perspective of bondholders looking at the CTL credit a cash deal is bad while a stock deal is good. The bias would be to wait and see. As to a strike– they always get settled one way or another and the terms of any settlement are immaterial to the credit.

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