PSIX's bond offering tripled in size due to high demand
PSINet sells $1.2 billion in bonds, demand heavy
By Nancy Leinfuss
NEW YORK, July 16 (Reuters) - Internet service provider PSINet Inc. (Nasdaq:PSIX - news) sold $1.2 billion worth of high-yield corporate bonds denominated in U.S. dollars and euros, in a market where demand was so heavy the offering's size was tripled from its original level.
The two-part offering was sold via the corporate bond private placement market to institutional investors eager for Internet-related junk bonds. One company official said it was probably the biggest high-yield bond offering ever by a busines-to-business Internet provider.
PSINet said it will use proceeds from the deal to finance capital expenditures such as acquiring additional telecommunications bandwidth, related facilities, and equipment; building Internet data centers; making corporate acquisitions and funding general corporate purposes.
The offering ''had tremendous participation from the institutional side,'' according to PSINet Treasurer Larry Winkler, with ''all the top bond houses participating'' in the issue.
PSINet had initially planned a $400 million issue, but the size quickly got bumped up to $800 million and later to $1.2 billion as demand grew.
''We went out with an interest in placing $400 million worth of euro- and dollar-denominated bonds and we got a very, very large response from institutional accounts in the U.S., and in Europe as well,'' Edward Postal, Chief Financial Officer of PSINet told Reuters in a telephone interview.
The company sold $1.05 billion in 11 percent 10-year notes, priced at a spread of 527 basis points -- or 5.27 percentage points -- over 10-year U.S. Treasuries, and 150 million euros of 11 percent 10-year notes, priced at a spread of 624 basis points over German Bunds with comparable maturities. A basis point is 1/100 of a percentage point.
The B-minus/B3 rated offering, which drew interest from more than 100 accounts, was underwritten by Donaldson Lufkin & Jenrette, Bear Stearns and Chase Securities.
The company had held presentations for institutional investors in London, Frankfurt and Amsterdam.
''One of the things that we've seen occurring in Europe, is that, as they have developed their high-yield market themselves, demand coming from Europe has increased substantially,'' Postal said.
Postal said the company decided to issue a euro-denominated tranche in the corporate bond issue because demand for euro-denominated high-yield debt has grown abroad.
''They've sort of demanded that things also be denominated in euro, their own currency, not just dollar-denominated bonds. It makes sense for us because we're a global company and most likely the largest Internet provider in Europe,'' Postal said.
''If you go back to the fourth quarter of 1998, our revenues actually were greater outside the United States, than in the United States,'' he said.
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