Business Context and Reporting Period
This Form 8-K Current Report, dated September 21, 2011, pertains to CenturyLink, Inc., Qwest Communications International Inc., and Qwest Corporation. The filing details a significant capital market transaction executed by Qwest Corporation (QC), an indirect wholly-owned subsidiary of CenturyLink.
Key Financial Metrics
- Debt Issuance: QC publicly sold $575,000,000 aggregate principal amount of 7.50% Notes due 2051.
- Offering Details: The offering included a $75,000,000 over-allotment option. The public offering price was 100% of the principal amount.
- Net Proceeds: After deducting underwriting discounts and estimated expenses, QC expects to receive approximately $557 million.
- Debt Redemption: Net proceeds are designated to redeem $550 million of outstanding 8.875% Notes due March 15, 2012, in October 2011.
- Interest Payments: Interest on the new Notes is payable quarterly in arrears, commencing December 15, 2011.
Material Changes
The primary material change is the refinancing of existing debt. QC is replacing a portion of its higher-interest debt (8.875% Notes due 2012) with new long-term debt (7.50% Notes due 2051). This transaction extends the maturity profile of the company's debt obligations and reduces the interest rate on the refinanced portion.
Outlook, Risks, and Management Commentary
- Use of Proceeds: Management intends to use the net proceeds to redeem $550 million of the $1.5 billion aggregate principal amount of the 8.875% Notes due 2012 and to pay related fees and expenses.
- Debt Seniority: The new Notes are senior unsecured obligations, ranking equally with existing and future unsecured and unsubordinated debt.
- Redemption Terms: QC may redeem the Notes in whole or in part on or after September 15, 2016, at 100% of the principal amount plus accrued interest.
- Liquidity: The transaction is expected to improve liquidity by extending maturities and lowering interest costs on the refinanced amount.
Investor Verification Checklist
- Verify the exact redemption date and premium (if any) for the 8.875% Notes due 2012 in the October 2011 redemption notice.
- Confirm the final net proceeds received after all transaction expenses are finalized.
- Review the Supplemental Indenture (Exhibit 4.1) for specific covenants and restrictions associated with the new 7.50% Notes.
- Assess the impact of the interest rate swap (from 8.875% to 7.50%) on future interest expense and EBITDA.