DENVER, Aug. 20 (UPI) -- Qwest Communications Inc. said Tuesday it has agreed to sell its yellow-pages business to a consortium led by The Carlyle Group and Welsh, Carson, Anderson and Stowe for $7.05 billion.
The deal, which is the biggest leveraged buy-out since the $25 billion deal involving RJR Nabisco in the late 1980s, involves the sale of the entire QwestDex publishing business in two stages, the first of which is expected to close in the fourth quarter 2002, with the second stage expected to close in 2003.
The deal gives Qwest a last-minute rescue line as it teetered on the edge of bankruptcy and faces growing pressure from lenders and shareholders to reduce its debt.
It is also expected to give a boost to the ailing telecoms sector, which has been beset by bankruptcies and failed attempts to sell assets and raise cash.
While many analysts were predicting that Qwest might not have enough cash to make it through the year, the QwestDex publishing deal gives the company enough liquidity to fund the company through 2005, experts said.
Richard C. Notebaert, Qwest's chairman and chief executive officer, said, "As we promised, we are moving aggressively to take the necessary steps to ensure the long-term success of the company and our ability to continue to provide world-class services to our customers.
"The sale of QwestDex is a significant part of our plan to deliver and strengthen our balance sheet and will allow us to focus on maximizing the profitability of our core operations," Notebaert said.
The transaction will be completed in two stages. The first stage, involving the sale of QwestDex operations in Colorado, Iowa, Minnesota, Nebraska, New Mexico, North Dakota and South Dakota, is for $2.75 billion and is expected to close in the fourth quarter of 2002.
The second phase, which includes Arizona, Idaho, Montana, Oregon, Utah, Washington and Wyoming, is for $4.30 billion and is expected to close in 2003.
Qwest said it expects to use the proceeds from the sale to pay down debt and for other company funding requirements.
The new company will be the exclusive directory publisher for Qwest in the states where the company provides local service, and will satisfy all of Qwest's publishing obligations and continue to provide world-class directory services to consumers and businesses.
Both stages are subject to customary closing conditions, including the satisfaction of conditions for the buyer's debt financing.
In addition, the second stage is contingent upon the receipt of certain state regulatory approvals and the buyer's ability to secure additional equity financing, which may be provided by Qwest.
Qwest said it has taken several additional steps to deliver on both its short-term and long-term objectives, including achieving positive free cash flow for the second quarter 2002 and announcing that Banc of America Securities LLC has agreed to act as sole arranger and sole book runner for a proposed $500 million-$750 million.
The company said it has also obtained a commitment from an affiliate of Bank of America for $200 million of its proposed new facility. The commitment is subject to completion of the restructuring of the existing syndicated credit facility and other customary closing conditions for a facility of this type, including the parties entering into definitive agreements.
Qwest is a local phone company in 14 Western states and one of the nation's largest long-distance companies. It has $26.5 billion in debt, with $4.6 billion coming mature next year, including the $3.4 billion already drawn this spring.
Caryle Group, the Washington-based investment group led by former Defense Secretary Frank C. Carlucci and other former political luminaries, has become a huge global investor with over $12 billion managed. The firm, which also counts former secretary of state James A. Baker III and former Office of Management and Budget director Richard Darman among its leaders. The group invests mainly in defense and aerospace, but has also invested in real-estate, healthcare, bottling and information technology firms.
Welsh Carson Anderson & Stowe made its reputation as one of the savviest private-equity firms by crafting successful deals in the communications and health care industries. Founded in 1979, the low-profile private-equity firm hit a major pothole in 2000 when its more than $500 million investment in Bridge Information Systems, a provider of financial news and information, hit the skids. Bridge filed for Chapter 11 Bankruptcy Court protection in February 2001.
