Primary Market Slightly Stronger On The Week


Telecom buyers will soon get a new possible investment as facilities-based provider: Telergy Inc. is planning to ring up the high yield market for the first time next year as a way to take out a $174 million bank loan that it closed last week.

Telergy's chief financial officer, Thomas O'Connor, said the company expects to refinance the new credit facility with high-yield bonds in the near future.

Proceeds from the three-year bank deal will be used to refinance the borrower's existing debt and fund the expansion of company's fiber optic network, which includes a 1,700-mile system connecting New York City and Montreal.

Last month, it was reported that the company was seeking a credit facility of up to $300 million to help fund its expansion instead of raising the money via the high-yield bond market. The company cited poor market conditions as the reason for the delay of the bond offering.

Syracuse, N.Y.-based Telergy's $250 million fiber optic network, once complete, will cover 90% of New York State.

BankAmerica acted as lead manager on the bank deal, with CIBC, Toronto-Dominion, and Royal Bank of Canada participating in the syndication.

Deals Of The Week

Elsewhere in the primary market, a number of deals actually priced last week, the bulk of them coming on Thursday.

Colt Telecom priced a 320 million euro ($328.9 million) transaction that was structured as senior notes and sold under Rule 144A. The deal carried a rating of B1 from Moody's Investors Service and B from Standard & Poor's. The issue carried a 7.725% coupon and priced at par to yield 273 basis points over Treasurys.

It is initially callable in 2004 at 103.813, and then prices fall in subsequent years to 102.542, 101.271, and par.

Spanish telecom company Jazztel, for its part, priced a 400 million euro transaction that carried a rating of Caa1 from Moody's Investors Service and CCC-plus from Standard & Poor's. It carried a coupon of 13.25% and priced at par to yield 820 basis points over Treasurys.

The offering is first callable in 2004 at 106.625, and prices fall in succeeding years to 104.417, 102.208 and par each year thereafter.

Viatel Inc. B-minus priced a deal on the smallish side, for $63.7 million. The issue received a rating of B3 from Moody's Investors Service and B- from Standard & Poor's.

It featured an 11.25% coupon and priced at par to yield 641 basis points over comparable Treasurys. The call schedule is as follows: in 2004, the price is 105.75; in 2005, 103.833; in 2006, 101.917; and in each subsequent year, par.

And Tele-1 Europe priced a 150 million euro transaction at par to yield 690 basis points over Treasurys. It carried an 11.875% coupon. The deal was rated Caa1 by Moody's Investors Service, and B-m,inus by Standard & Poor's. First call is in 2004 at 105.94, an then prices fall in subsequent years to 103.96, 101.98 and par.