Filed
Pursuant to Rule 424(b)(5)
Registration No. 333-156101-03
CALCULATION
OF REGISTRATION FEE(1)
|
|
|
|
|
|
|
Title of each class of securities
|
|
|
Amount to be
|
|
|
Amount of
|
to be registered
|
|
|
Registered(2)
|
|
|
registration fee(3)
|
7.50% Notes due 2051 of Qwest Corporation
|
|
|
$575,000,000
|
|
|
$66,758
|
|
|
|
|
|
|
|
|
|
(1)
|
Calculated in accordance with Rule 457(o) and
Rule 457(r).
|
|
(2)
|
Includes $75,000,000 aggregate principal amount of
7.50% Notes due 2051 that may be offered and sold pursuant
to the exercise in full of the underwriters option to
purchase additional 7.50% Notes due 2051 to cover
over-allotments.
|
|
(3)
|
The fee has been partially satisfied by applying, pursuant to
Rule 457(p) under the Securities Act of 1933, a portion of
the previously paid filing fee of $145,359 that was paid with
respect to $1,235,000,000 aggregate initial public offering
price of securities that were previously registered pursuant to
the Registration Statement
No. 333-127160,
filed by Qwest Communications International Inc.
(QCII), the indirect parent of the registrant for
this offering, and certain of its subsidiaries on August 3,
2005, which securities were not sold thereunder. Of this
previously paid amount, $132,145 was applied to the filing fee
payable pursuant to Registration Statement
No. 333-130426
filed by QCII and certain of its subsidiaries on
December 19, 2005, but no securities were sold thereunder,
and $145,359 was then applied to any filing fee payable pursuant
to Registration Statement
No. 333-156101
filed by QCII and certain of its subsidiaries, including the
registrant for this offering, on December 12, 2008 (the
2008 Registration Statement). Of this previously
paid amount, (i) $45,226 was applied to the filing fee
payable pursuant to Registration Statement No.
333-162855,
resulting in a remaining credit balance applied to the 2008
Registration Statement of $100,133, and (ii) $76,772 was
applied to the filing fee payable pursuant to Registration
Statement
No. 333-156101-03,
resulting in a remaining credit balance under the 2008
Registration Statement of $23,361. The 7.50% Notes due 2051
referenced above are being offered and sold pursuant to the 2008
Registration Statement. Accordingly, $23,361 of the aggregate
filing fee of $66,758 for this offering is being offset against
the filing fee previously paid and carried forward for
application in connection with offerings under the 2008
Registration Statement, which leaves a balance of $43,397 to be
paid in connection with this offering. This Calculation of
Registration Fee table shall be deemed to update the
Calculation of Registration Fee table in the 2008
Registration Statement.
|
(To Prospectus dated
December 12, 2008)
$500,000,000
Qwest Corporation
7.50% Notes due
2051
Qwest Corporation is offering $500,000,000 of 7.50% Notes
due September 15, 2051 pursuant to this prospectus
supplement. We will pay interest on the Notes quarterly in
arrears on March 15, June 15, September 15 and
December 15 of each year, beginning December 15, 2011.
We may redeem the Notes, in whole or in part, at any time on and
after September 15, 2016 at a redemption price equal to
100% of the principal amount redeemed plus accrued and unpaid
interest to the redemption date. The Notes will be issued in
minimum denominations of $25 and integral multiples of $25 in
excess thereof.
We intend to list the Notes on the New York Stock Exchange and
expect trading in the Notes on the New York Stock Exchange to
begin within 30 days after the Notes are first issued.
The Notes will be our senior unsecured obligations and will rank
senior to any of our future subordinated debt and rank equally
in right of payment with all of our existing and future
unsecured and unsubordinated debt.
Investing in our Notes involves risks. See Risk
Factors beginning on
page S-9
of this prospectus supplement to read about certain risks you
should consider before investing in the Notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Proceeds to
|
|
|
Price to
|
|
Underwriting
|
|
Qwest
|
|
|
Public(1)
|
|
Discount(2)
|
|
Corporation(3)
|
|
Per Note
|
|
|
100.00
|
%
|
|
|
3.15
|
%
|
|
|
96.85
|
%
|
Total(4)
|
|
$
|
500,000,000
|
|
|
$
|
15,750,000
|
|
|
$
|
484,250,000
|
|
|
|
|
(1)
|
|
Plus accrued interest, if any, from
September 21, 2011, if settlement occurs after that date.
|
|
(2)
|
|
An underwriting discount of $0.7875
per Note (or up to $15,750,000 for all Notes) will be deducted
from the proceeds paid to us by the underwriters. However, the
underwriting discount will be $0.5000 per Note for sales to
certain institutions. As a result of sales to certain
institutions, the total underwriting discount and the total
proceeds to us (after deducting such discount) will equal
$15,501,833 and $484,498,167, respectively, assuming no exercise
of the over-allotment option described below.
|
|
(3)
|
|
Excluding our expenses.
|
|
(4)
|
|
Assumes no exercise of the
over-allotment option described below.
|
We have granted the underwriters an option to purchase up to an
additional $75,000,000 aggregate principal amount of Notes, at
the price to public less the underwriting discount, within
30 days from the date of this prospectus supplement to
cover over-allotments, if any.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement or the
accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The underwriters expect to deliver the Notes only in book-entry
form through the facilities of The Depository Trust Company
for the accounts of its participants, including Euroclear Bank
S.A./N.V., as operator of the Euroclear System, and Clearstream
Banking,
societe anonyme
, against payment in New York,
New York on or about September 21, 2011.
Joint Book-Running
Managers
|
|
|
|
|
|
|
BofA Merrill Lynch
|
|
Morgan Stanley
|
|
UBS Investment Bank
|
|
Wells Fargo Securities
|
Lead Managers
|
|
J.P.
Morgan
|
RBC Capital Markets
|
Co-Managers
|
|
SunTrust
Robinson Humphrey
|
US Bancorp
|
The date of this prospectus
supplement is September 14, 2011.
TABLE OF
CONTENTS
|
|
|
|
|
|
|
Page
|
|
Prospectus Supplement
|
|
|
|
S-1
|
|
|
|
|
S-2
|
|
|
|
|
S-3
|
|
|
|
|
S-4
|
|
|
|
|
S-9
|
|
|
|
|
S-11
|
|
|
|
|
S-11
|
|
|
|
|
S-12
|
|
|
|
|
S-14
|
|
|
|
|
S-23
|
|
|
|
|
S-28
|
|
|
|
|
S-31
|
|
|
|
|
S-31
|
|
|
Prospectus
|
About This Prospectus
|
|
|
ii
|
|
Where You Can Find More Information
|
|
|
ii
|
|
Incorporation by Reference
|
|
|
iii
|
|
Forward-Looking Statements
|
|
|
iv
|
|
The Company
|
|
|
1
|
|
Use of Proceeds
|
|
|
2
|
|
Ratio of Earnings to Fixed Charges
|
|
|
2
|
|
Legal Matters
|
|
|
2
|
|
Experts
|
|
|
2
|
|
ABOUT
THIS PROSPECTUS SUPPLEMENT
This prospectus supplement and the accompanying prospectus are
part of a registration statement that we and certain of our
affiliates filed with the Securities and Exchange Commission
(the SEC) using a shelf registration
process. Under this process, the document we use to offer
securities is divided into two parts. The first part is this
prospectus supplement, which describes the specific terms of the
offering and also updates and supplements information contained
in the accompanying prospectus and the documents incorporated by
reference into this prospectus supplement and the accompanying
prospectus. The second part is the accompanying prospectus,
which provides you with general information about us and
offerings we may conduct. If the description of the offering
varies between this prospectus supplement and the accompanying
prospectus, you should rely on the information in this
prospectus supplement. Before purchasing our Notes, you should
carefully read both this prospectus supplement and the
accompanying prospectus, together with the additional
information described under the heading Where You Can Find
More Information.
You should rely solely on the information contained in this
prospectus supplement, the accompanying prospectus, any related
free writing prospectus issued by us and the documents
incorporated by reference herein or therein. We have not, and
the underwriters have not, authorized any other person to
provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely
on it. We are not, and the underwriters are not, making an offer
of the Notes in any jurisdiction where the offer or sale is not
permitted. You should assume that the information contained or
incorporated by reference in this prospectus supplement, the
accompanying prospectus, any related free writing prospectus
issued by us, and any document incorporated by reference herein
or therein is accurate only as of the date on the front cover of
those documents. Our business, financial condition, results of
operations and prospects may have changed since that date.
Unless otherwise provided in this prospectus supplement or the
context requires otherwise, in this prospectus supplement:
|
|
|
|
|
QC refers to Qwest Corporation on a stand-alone
basis;
|
|
|
|
Qwest, we, us, the
Company and our refer to Qwest
Corporation and its consolidated subsidiaries;
|
|
|
|
QSC refers to our direct parent company, Qwest
Services Corporation, and its consolidated subsidiaries;
|
|
|
|
QCII refers to QSCs direct parent company and
our indirect parent company, Qwest Communications International
Inc., and its consolidated subsidiaries;
|
|
|
|
CenturyLink refers to QCIIs direct parent
company and our ultimate parent company, CenturyLink, Inc., and
its consolidated subsidiaries;
|
|
|
|
Embarq refers to Embarq Corporation and its
subsidiaries, which CenturyLink acquired on July 1, 2009;
|
|
|
|
Savvis refers to SAVVIS, Inc. and its subsidiaries,
which CenturyLink acquired on July 15, 2011; and
|
|
|
|
Notes refer to the notes being offered pursuant to
this prospectus supplement.
|
S-1
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus,
including the documents incorporated by reference herein and
therein, contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933,
as amended (the Securities Act), and
Section 21E of the Securities Exchange Act of 1934, as
amended (the Exchange Act). These statements are
intended to be covered by the safe harbor for
forward-looking statements provided by the Private
Securities Litigation Reform Act of 1995. These statements may
be made directly in this prospectus supplement or the
accompanying prospectus or may be incorporated in this
prospectus supplement or the accompanying prospectus by
reference to other documents and may include statements for
periods following the completion of this offering.
Forward-looking statements are all statements other than
statements of historical fact, such as statements regarding our
financial plans, business plans, indebtedness, acquisitions,
integration initiatives, and general economic and business
conditions. Words such as anticipates,
may, can, plans,
feels, believes, estimates,
expects, projects, intends,
likely, will, should,
to be and similar expressions are intended to
identify forward-looking statements.
Our forward-looking statements are based on current expectations
only, and are subject to a number of risks, uncertainties and
assumptions, many of which are beyond our control. Actual events
and results may differ materially from those anticipated,
estimated or projected if one or more of these risks or
uncertainties materialize, or if underlying assumptions prove
incorrect. Factors that could affect actual results include but
are not limited to: the timing, success and overall effects of
competition from a wide variety of competitive providers; the
risks inherent in rapid technological change; the effects of
ongoing changes in the regulation of the communications industry
(including those arising out of the proposed rules of the
Federal Communication Commission (the FCC) regarding
intercarrier compensation and universal service funds and the
FCCs related Notice of Proposed Rulemaking released on
February 8, 2011); CenturyLinks ability to
effectively adjust to changes in the communications industry and
changes in the composition and management of our operations
caused by CenturyLinks recent acquisitions of Savvis, QCII
and Embarq; CenturyLinks ability to successfully integrate
the operations of Savvis, QCII (including us) and Embarq into
its operations, including the possibility that the anticipated
benefits from these acquisitions cannot be fully realized in a
timely manner or at all, or that integrating the acquired
operations will be more difficult, disruptive or costly than
anticipated; CenturyLinks and QCIIs ability to use
net operating loss carryovers in projected amounts; the effects
of changes in CenturyLinks allocation of the QCII purchase
price after the date hereof or the effects of allocating the
Savvis purchase price in future quarters; CenturyLinks
ability to effectively manage its and our expansion
opportunities, including retaining and hiring key personnel;
possible changes in the demand for, or pricing of, our products
and services; our ability to successfully introduce new product
or service offerings on a timely and cost-effective basis; our
continued access to credit markets on favorable terms; our
ability to collect our receivables from financially troubled
communications companies; any adverse developments in legal
proceedings involving CenturyLink or its subsidiaries;
unanticipated increases or other changes in the future cash
requirements of CenturyLink or us, whether caused by
unanticipated increases in capital expenditures, pension
contributions or otherwise; our ability to successfully
negotiate collective bargaining agreements on reasonable terms
without work stoppages; the effects of adverse weather; other
risks referenced from time to time in this prospectus supplement
and the accompanying prospectus or other of our filings with the
SEC; and the effects of more general factors such as changes in
interest rates, in tax rates, in accounting policies or
practices, in operating, medical, pension or administrative
costs, in general market, labor or economic conditions, or in
legislation, regulation or public policy. These and other
uncertainties are described in greater detail in Item 1A of
Part II of our Quarterly Report on
Form 10-Q
for the fiscal quarter ended June 30, 2011, as they may be
updated and supplemented by our subsequent SEC reports. For more
information about these risks, see Risk Factors in
this prospectus supplement.
You should be aware that new factors impacting our actual
results may emerge from time to time and it is not possible for
us to identify all such factors nor can we predict the impact of
each such factor on the business or the extent to which any one
or more factors may cause actual results to differ from those
reflected in any forward-looking statements. You are further
cautioned not to place undue reliance on our forward-looking
statements, which speak only as of the date of the document in
which they appear. Except for meeting
S-2
our ongoing obligations under the federal securities laws, we
undertake no obligation to update or revise our forward-looking
statements for any reason.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, and other
information with the SEC. You may read and copy that information
at the Public Reference Room of the SEC, located at
100 F Street, N.E., Washington, D.C. 20549. You
may obtain information on the operation of the Public Reference
Room by calling the SEC at
1-800-SEC-0330.
You may also obtain copies of this information by mail from the
SEC at the above address, at prescribed rates. In addition, the
SEC maintains an Internet site at
www.sec.gov
, from which
interested persons can electronically access the registration
statement of which this prospectus supplement and the
accompanying prospectus forms a part, including the exhibits and
schedules thereto, as well as reports and other information
about us.
We are incorporating by reference into this
prospectus supplement specific documents that we filed with the
SEC, which means that we can disclose important information to
you by referring you to those documents that are considered part
of this prospectus supplement and accompanying prospectus. We
incorporate by reference the documents listed below, and any
future documents that we file with the SEC under
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act until
the termination or completion of the offering of all of the
securities covered by this prospectus supplement. This
prospectus supplement and accompanying prospectus are part of a
registration statement filed with the SEC, which may contain
additional information that you might find important.
We are incorporating by reference into this
prospectus supplement the following documents filed with the SEC
by us;
provided, however
, we are not incorporating by
reference, in each case, any such documents or portions of such
documents that have been furnished but not
filed for purposes of the Exchange Act:
|
|
|
Qwest Corporation Filings
|
|
Applicable Period
|
|
Annual Report on
Form 10-K
|
|
Fiscal year ended December 31, 2010
|
Quarterly Reports on
Form 10-Q
|
|
Quarterly periods ended March 31, 2011 and June 30, 2011
|
Current Report on
Form 8-K
|
|
Filed June 8, 2011
|
We will provide to each person to whom this prospectus
supplement and the accompanying prospectus is delivered, upon
written or oral request and without charge, a copy of the
documents referred to above that we have incorporated by
reference (except for exhibits, unless the exhibits are
specifically incorporated by reference into the filing). You can
request copies of such documents if you call or write us at the
following address or telephone number: Qwest Corporation, 100
CenturyLink Drive, Monroe, Louisiana 71203, Attention: Investor
Relations, or by telephoning us at
(318) 388-9000.
Each of this prospectus supplement, the accompanying prospectus
and the information incorporated by reference herein or therein
may contain summary descriptions of certain agreements that we
have filed as exhibits to various SEC filings, as well as
certain agreements that we will enter into in connection with
the offering of securities covered by this prospectus
supplement. These summary descriptions do not purport to be
complete and are subject to, or qualified in their entirety by
reference to, the definitive agreements to which they relate.
Copies of the definitive agreements will be made available
without charge to you by making a written or oral request to us.
Information contained in this prospectus supplement, the
accompanying prospectus or in any particular document
incorporated herein or therein by reference is not necessarily
complete and is qualified in its entirety by the information and
financial statements appearing in all of the documents
incorporated by reference herein and therein and should be read
together therewith. Any statement contained in a document
incorporated or deemed to be incorporated by reference in this
prospectus supplement and the accompanying prospectus will be
deemed to be modified or superseded to the extent that a
statement contained in this prospectus supplement or in any
subsequently filed document which also is or is deemed to be
incorporated by reference in this prospectus supplement and the
accompanying prospectus modifies or supersedes such statement.
S-3
PROSPECTUS
SUPPLEMENT SUMMARY
The following summary does not contain all of the information
you should consider before investing in the Notes and is
qualified in its entirety by reference to the more detailed
information and consolidated historical financial statements
incorporated by reference in this prospectus supplement and the
accompanying prospectus as well as the materials filed with the
SEC that are considered to be part of this prospectus supplement
and the accompanying prospectus. Before making an investment
decision, you should read this prospectus supplement and the
accompanying prospectus carefully, including Risk
Factors and the documents incorporated by reference herein
and therein (which, among other things, describe recent changes
in our business, accounting and operating data counting
methodologies).
Qwest
Corporation
Business
We are an integrated communications company primarily engaged in
providing an array of communications services to customers in
14 states principally in the western United States,
including local voice, wholesale network access, broadband, data
and video services. In certain markets, we also provide fiber
transport and other services to competitive local exchange
carriers, and other communications, professional and business
information services. As of June 30, 2011, we operated
approximately 8.8 million access lines, and served
approximately 3.0 million broadband subscribers.
We were incorporated in 1911 under the laws of the state of
Colorado. As a result of CenturyLinks acquisition of QCII
on April 1, 2011, we are an indirect wholly owned
subsidiary of CenturyLink. Our principal executive office is
located at 100 CenturyLink Drive, Monroe, Louisiana 71203 and
our telephone number is
(318) 388-9000.
Our website is located at
www.centurylink.com
. The
information set forth on our website is not incorporated by
reference into this prospectus supplement.
Corporate
Structure of Our Parent Company
The following chart illustrates the corporate structure and debt
capitalization of CenturyLink and certain of its principal
consolidated subsidiaries as of June 30, 2011. This chart
(i) is provided for illustrative purposes only and has not
been prepared in accordance with U.S. generally accepted
accounting principles, (ii) reflects the face value of
total current and long-term indebtedness for borrowed money,
(iii) does not represent all legal entities of CenturyLink
and its consolidated subsidiaries or all obligations of such
entities and (iv) does not reflect certain guarantees among
QCII, QSC and Qwest Capital Funding Inc.
(See chart on next page)
S-4
Total
CenturyLink Consolidated Debt:
$20.565 billion
1
(as
of June 30, 2011)
|
|
|
(1)
|
|
Excludes unamortized premiums, net of discounts, obligations
under capital leases, and fair value hedge adjustments.
|
|
(2)
|
|
CenturyLink also maintains a $1.7 billion revolving credit
facility (a portion of which can be used for letters of credit)
and a $160 million uncommitted revolving letter of credit
facility. On June 30, 2011, CenturyLink had no borrowings
outstanding under its revolving credit facility and had an
aggregate of $131 million of letters of credit outstanding
under its two facilities.
|
|
(3)
|
|
As described in Use of Proceeds, we expect to use
the net proceeds from this offering to redeem a portion of the
$1.5 billion aggregate principal amount of our outstanding
8.875% Notes due 2012 (the 8.875% Notes)
prior to maturity. For more information on our capitalization,
see Capitalization.
|
S-5
The
Offering
|
|
|
Issuer
|
|
Qwest Corporation, a Colorado corporation.
|
|
Notes
|
|
$500,000,000 of 7.50% Notes due 2051 issued in minimum
denominations of $25 and integral multiples of $25 in excess
thereof.
|
|
Maturity Date
|
|
The Notes will mature on September 15, 2051.
|
|
Interest Rate
|
|
The Notes will bear interest from September 21, 2011 at the
rate of 7.50% per year, payable quarterly in arrears.
|
|
Interest Payment Dates
|
|
March 15, June 15, September 15 and
December 15 of each year, beginning December 15, 2011.
|
|
Optional Redemption
|
|
We may redeem the Notes, in whole or in part, at any time on and
after September 15, 2016 at a redemption price equal to
100% of the principal amount redeemed plus accrued and unpaid
interest to the redemption date.
|
|
No Security
|
|
None of our obligations under the Notes will be secured by
collateral or guaranteed by any of our affiliates or other
persons.
|
|
Certain Covenants
|
|
The indenture governing the Notes contains certain restrictions
on our ability to create liens and to merge, consolidate or sell
all or substantially all of our assets, subject to a number of
important qualifications and limitations. See Description
of the Notes Certain Covenants.
|
|
Ranking
|
|
The Notes will be our senior unsecured obligations. The Notes
will rank senior to any of our future subordinated debt and rank
equally in right of payment with all of our existing and future
unsecured and unsubordinated debt. See Description of the
Notes Ranking.
|
|
Use of Proceeds
|
|
We expect to use the net proceeds from the offering of the Notes
to redeem a portion of the $1.5 billion aggregate principal
amount of our outstanding 8.875% Notes prior to maturity.
See Use of Proceeds.
|
|
Listing
|
|
We intend to list the Notes on the New York Stock Exchange and
expect trading in the Notes on the New York Stock Exchange to
begin within 30 days after the Notes are first issued.
|
|
Governing Law
|
|
New York.
|
|
Trustee, Registrar and Paying Agent
|
|
U.S. Bank National Association.
|
|
Risk Factors
|
|
Investing in the Notes involves risks. Before deciding whether
to invest in the Notes, you should carefully consider the
information set forth in the section of this prospectus
supplement entitled Risk Factors beginning on
page S-9,
as well as the other information contained in or incorporated by
reference into this prospectus supplement and the accompanying
prospectus.
|
S-6
Selected
Historical Financial Information
The following tables set forth our selected historical
consolidated financial information. As a result of
CenturyLinks April 1, 2011 acquisition of QCII, we
became an indirect wholly owned subsidiary of CenturyLink. In
accordance with applicable SEC rules, CenturyLink has elected to
push down its accounting of the QCII acquisition to
our consolidated financial statements. Consequently, even though
the acquisition did not change our status as a distinct and
continuing legal entity, our consolidated financial information
for the period after the acquisition (referred to below as the
Successor period) is presented on a different cost
basis than, and is therefore not comparable to, our consolidated
financial information for the periods before the acquisition
(referred to below as the Predecessor periods). The
selected statement of operations data for the three months ended
June 30, 2011 (Successor), the three months ended
March 31, 2011 (Predecessor), and the six months ended
June 30, 2010 (Predecessor) and the selected balance sheet
data as of June 30, 2011 (Successor), March 31, 2011
(Predecessor) and June 30, 2010 (Predecessor) are derived
from our unaudited consolidated financial statements. In the
opinion of our management, all adjustments considered necessary
for a fair presentation of the interim June 30 and March 31
financial information have been included. The selected statement
of operations data for each of the years ended December 31,
2010, 2009, 2008, 2007 and 2006 (Predecessor) and the selected
balance sheet data as of December 31, 2010, 2009, 2008,
2007 and 2006 (Predecessor) are derived from our consolidated
financial statements that were audited by KPMG LLP, an
independent registered public accounting firm. The following
information should be read together with our consolidated
financial statements, the notes related thereto and
managements related discussion and analysis of our
financial condition and results of operations, all of which are
contained in our reports filed with the SEC and incorporated
herein by reference. See Where You Can Find More
Information. The operating results for the interim 2011
periods reflected below are not necessarily indicative of the
results to be expected for any future period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
As of and for the
|
|
|
As of and for the
|
|
As of and for the
|
|
|
|
|
|
|
|
|
|
|
|
|
three months
|
|
|
three months
|
|
six months
|
|
|
|
|
|
|
|
|
|
|
|
|
ended
|
|
|
ended
|
|
ended
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
March 31,
|
|
June 30,
|
|
As of and for the year ended December 31,
|
|
|
2011
|
|
|
2011
|
|
2010
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
Statement of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
2,231
|
|
|
|
$
|
2,268
|
|
|
$
|
4,660
|
|
|
$
|
9,271
|
|
|
$
|
9,731
|
|
|
$
|
10,388
|
|
|
$
|
10,691
|
|
|
$
|
10,721
|
|
Operating expenses
|
|
|
1,861
|
|
|
|
|
1,630
|
|
|
|
3,350
|
|
|
|
6,788
|
|
|
|
7,169
|
|
|
|
7,525
|
|
|
|
7,631
|
|
|
|
8,288
|
|
Income before income tax expense
|
|
|
281
|
|
|
|
|
490
|
|
|
|
996
|
|
|
|
1,873
|
|
|
|
1,921
|
|
|
|
2,267
|
|
|
|
2,440
|
|
|
|
1,882
|
|
Net income(1)
|
|
|
165
|
|
|
|
|
299
|
|
|
|
556
|
|
|
|
1,082
|
|
|
|
1,197
|
|
|
|
1,438
|
|
|
|
1,527
|
|
|
|
1,203
|
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
25,393
|
|
|
|
$
|
13,301
|
|
|
$
|
13,899
|
|
|
$
|
13,686
|
|
|
$
|
15,038
|
|
|
$
|
15,443
|
|
|
$
|
16,522
|
|
|
$
|
17,404
|
|
Total debt(2)
|
|
|
8,440
|
|
|
|
|
8,016
|
|
|
|
7,908
|
|
|
|
8,012
|
|
|
|
8,386
|
|
|
|
7,588
|
|
|
|
7,911
|
|
|
|
7,735
|
|
Total stockholders equity (deficit)
|
|
|
10,110
|
|
|
|
|
(1,531
|
)
|
|
|
(308
|
)
|
|
|
(831
|
)
|
|
|
312
|
|
|
|
786
|
|
|
|
1,370
|
|
|
|
2,252
|
|
Other Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
610
|
|
|
|
$
|
869
|
|
|
$
|
1,449
|
|
|
$
|
3,235
|
|
|
$
|
3,167
|
|
|
$
|
3,479
|
|
|
$
|
3,670
|
|
|
$
|
3,374
|
|
Net cash used in investing activities
|
|
|
490
|
|
|
|
|
335
|
|
|
|
720
|
|
|
|
1,256
|
|
|
|
1,100
|
|
|
|
1,402
|
|
|
|
1,254
|
|
|
|
1,279
|
|
Net cash used in financing activities
|
|
|
309
|
|
|
|
|
525
|
|
|
|
1,518
|
|
|
|
2,801
|
|
|
|
1,286
|
|
|
|
2,136
|
|
|
|
2,400
|
|
|
|
1,980
|
|
Payments for property, plant and equipment and capitalized
software
|
|
|
300
|
|
|
|
|
341
|
|
|
|
608
|
|
|
|
1,240
|
|
|
|
1,106
|
|
|
|
1,404
|
|
|
|
1,270
|
|
|
|
1,410
|
|
Total debt to total capital ratio(3)
|
|
|
45
|
%
|
|
|
|
124
|
%
|
|
|
104
|
%
|
|
|
112
|
%
|
|
|
96
|
%
|
|
|
91
|
%
|
|
|
85
|
%
|
|
|
77
|
%
|
Ratio of earnings to fixed charges(4)
|
|
|
3.7
|
|
|
|
|
3.9
|
|
|
|
3.8
|
|
|
|
3.7
|
|
|
|
3.7
|
|
|
|
4.4
|
|
|
|
4.6
|
|
|
|
3.7
|
|
S-7
|
|
|
(1)
|
|
See Managements Discussion and Analysis of Financial
Condition and Results of Operations Results of
Operations in Item 7 of our Annual Report on
Form 10-K
for the year ended December 31, 2010 for a discussion of
unusual items affecting the results for 2010, 2009 and 2008.
Results for 2007 and 2006 were impacted by various changes in
accounting principles, including the adoption of Financial
Accounting Standards Board Interpretation No. 48,
Accounting for Uncertainty in Income Taxes (included
in Accounting Standards Codification 740), which was effective
for us on January 1, 2007.
|
|
(2)
|
|
Total debt is the sum of current maturities of long-term debt
and long-term debt on our consolidated balance sheets. For
information on our total obligations, see
Managements Discussion and Analysis of Financial
Condition and Results of Operations Future
Contractual Obligations in Item 7 of our Annual
Report on
Form 10-K
for the year ended December 31, 2010.
|
|
(3)
|
|
The total debt to total capital ratio is calculated by dividing
total debt (which is defined in footnote 2 above) by total
capital. Total capital is the sum of total debt and total
stockholders equity (deficit).
|
|
(4)
|
|
For information on how we calculate our ratio of earnings to
fixed charges, see Exhibit 12 to our Annual Report on
Form 10-K
for the year ended December 31, 2010 and our Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 2011, each of which is
incorporated by reference herein.
|
S-8
RISK
FACTORS
Before purchasing the Notes, you should carefully consider
the risks described below and the risks disclosed in
Item 1A of Part II of our Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2011, as well as the other
information contained or incorporated by reference in this
prospectus supplement and the accompanying prospectus.
Risk
Factors Relating to the Notes
We and
our affiliates have a significant amount of indebtedness, which
could adversely affect our financial performance and impact our
ability to make payments on the Notes.
The degree to which we, together with CenturyLink and its other
subsidiaries, are leveraged could have important consequences to
the holders of the Notes. See Capitalization. For
example, it:
|
|
|
|
|
may limit our ability to obtain additional financing for working
capital, capital expenditures or general corporate purposes,
particularly if the ratings assigned to our debt securities by
nationally recognized credit rating organizations (credit
ratings) are revised downward;
|
|
|
|
|
|
will require us to dedicate a substantial portion of our cash
flow from operations to the payment of interest and principal on
our debt, reducing the funds available to us for other purposes
including acquisitions, capital expenditures, marketing spending
and expansion of our business;
|
|
|
|
|
|
may limit our flexibility to adjust to changing business and
market conditions and make us more vulnerable to a downturn in
general economic conditions as compared to our
competitors; and
|
|
|
|
may put us at a competitive disadvantage to some of our
competitors that are not as leveraged.
|
As of June 30, 2011, we owed approximately
$7.8 billion under unsecured and unsubordinated debt that
would have ranked equally with the Notes.
Our
financial performance and other factors could adversely impact
our ability to make payments on the Notes.
Our ability to make scheduled payments or to refinance our
obligations with respect to our indebtedness (including the
Notes) will depend on our financial and operating performance,
which, in turn, is subject to prevailing economic and
competitive conditions and other factors beyond our control.
Approximately $2.25 billion aggregate principal amount of
our debt obligations (including the 8.875% Notes, which we
intend to partially redeem with the net proceeds from this
offering) come due over the next three years. While we currently
believe we will have the financial resources to meet our
obligations when they become due, we cannot fully anticipate our
future performance or financial condition, or the future
condition of the credit markets or the economy generally.
Other
than certain covenants limiting liens and certain corporate
transactions, the Notes will not contain restrictive covenants,
and there is no protection in the event of a change of control
or a highly leveraged transaction.
The indenture governing the Notes does not contain restrictive
covenants that would protect you from many kinds of transactions
that may adversely affect you. The indenture does not contain
provisions that permit the holders of the Notes to require us to
repurchase the Notes in the event of a change of control of QC,
recapitalization or similar transaction. In addition, the
indenture does not contain covenants limiting any of the
following:
|
|
|
|
|
the payment of dividends and certain other payments by us and
our subsidiaries;
|
|
|
|
the incurrence of additional indebtedness by us or our
subsidiaries;
|
|
|
|
the issuance of stock of our subsidiaries;
|
|
|
|
our ability and our subsidiaries ability to enter into
sale/leaseback transactions;
|
|
|
|
our creation of restrictions on the ability of our subsidiaries
to make payments to us;
|
S-9
|
|
|
|
|
our ability to engage in asset sales; and
|
|
|
|
our ability or our subsidiaries ability to enter into
certain transactions with affiliates.
|
As a result, we could enter into any such transaction even
though the transaction could increase the total amount of our
outstanding indebtedness, adversely affect our capital structure
or the credit ratings of our debt securities, or otherwise
adversely affect the holders of the Notes.
CenturyLink has cash management arrangements with certain of its
subsidiaries, including us, which results in substantial
portions of our cash being transferred regularly to CenturyLink.
Although we receive matching receivables from CenturyLink in
exchange for these transfers, these arrangements expose us to
the risk of nonpayment of such receivables by CenturyLink.
An
active trading market may not develop for the Notes, which could
adversely affect the price of the Notes in the secondary market
and your ability to resell the Notes should you desire to do
so.
The Notes are a new issue of securities and there is no
established trading market for the Notes. Although we intend to
apply for listing of the Notes on the New York Stock Exchange,
we cannot make any assurance as to:
|
|
|
|
|
the development of an active trading market;
|
|
|
|
the liquidity of any trading market that may develop;
|
|
|
|
the ability of holders to sell their Notes; or
|
|
|
|
the price at which the holders would be able to sell their Notes.
|
If a trading market were to develop, the future trading prices
of the Notes will depend on many factors, including prevailing
interest rates, the credit ratings of our debt securities, the
market for similar securities, the overall condition of the
financial markets, and our operating performance and financial
condition. If a trading market develops, there is no assurance
that it will continue.
An
increase in market interest rates could result in a decrease in
the relative value of the Notes.
In general, as market interest rates rise, notes bearing
interest at a fixed rate generally decline in value.
Consequently, if you purchase these Notes and market interest
rates increase, the market values of the Notes may decline. We
cannot predict the future level of market interest rates.
Ratings
of the Notes may not reflect all risks of an investment in the
Notes, and changes in these ratings could adversely affect the
market price of the Notes.
We expect that the Notes will be rated by at least one
nationally recognized credit rating organization. A debt rating
is not a recommendation to purchase, sell or hold the Notes.
These ratings are not intended to correspond to market price or
suitability for a particular investor. Additionally, ratings may
be lowered or withdrawn in their entirety at any time. Any
actual or anticipated downgrade or withdrawal of a rating by a
rating agency governing the Notes could have an adverse effect
on the trading prices or liquidity of the Notes.
Redemption
may adversely affect your return on the Notes.
We have the right to redeem some or all of the Notes prior to
maturity, as described under Description of the
Notes Redemption and Repayment. We may redeem
the Notes at times when prevailing interest rates may be
relatively low compared to rates at the time of issuance of the
Notes. Under these circumstances, you may not be able to
reinvest the redemption proceeds in a comparable security at an
effective interest rate as high as that of the Notes.
Risk
Factors Relating to Our Business, Our Regulatory Environment and
Our Liquidity
We face competitive, technological, regulatory, financial and
other risks (including risks posed by the high debt levels of
our affiliates), many of which are described in Item 1A of
Part II of our Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2011, which is incorporated
by reference herein.
S-10
USE OF
PROCEEDS
The net proceeds from the sale of the Notes are expected to be
approximately $484 million, after deducting underwriting
discounts and our estimated expenses, and assuming the
underwriters do not exercise their over-allotment option. We
expect to use the net proceeds from this offering to redeem a
portion of the $1.5 billion aggregate principal amount of
our outstanding 8.875% Notes prior to their stated maturity
date of March 15, 2012, and to pay all related fees and
expenses. Pending completion of this redemption transaction, we
intend to invest the net proceeds from this offering in
short-term investment grade, interest-bearing securities. Prior
to March 15, 2012, we intend to refinance the portion of
the 8.875% Notes that will remain outstanding following
this redemption transaction.
CAPITALIZATION
The following table sets forth our consolidated cash and cash
equivalents and capitalization as of June 30, 2011 on a
historical basis. You should read the following table in
conjunction with Use of Proceeds herein and our
consolidated financial statements and the notes thereto
incorporated by reference into this prospectus supplement and
the accompanying prospectus.
|
|
|
|
|
|
|
As of June 30,
|
|
|
|
2011
|
|
|
|
(Unaudited)
|
|
|
|
(Dollars in millions)
|
|
|
Cash and cash equivalents(1)
|
|
$
|
12
|
|
|
|
|
|
|
Long-term debt:
|
|
|
|
|
Unsecured notes and debentures(2)
|
|
$
|
7,804
|
|
Unamortized premiums, net of discounts
|
|
|
458
|
|
Capital leases and other
|
|
|
178
|
|
|
|
|
|
|
Total long-term debt
|
|
|
8,440
|
|
Total stockholders equity
|
|
|
10,110
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
18,550
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Shortly after CenturyLinks April 1, 2011 acquisition
of QCII, we entered into a cash management arrangement with
CenturyLink, under which a substantial portion of our cash is
transferred regularly to CenturyLink in exchange for matching
receivables. For more information, see Risk
Factors Risk Factors Relating to the Notes.
|
|
(2)
|
|
We expect to use the net proceeds from this offering to redeem a
portion of the $1.5 billion aggregate principal amount of
our outstanding 8.875% Notes prior to maturity. As a
result, we do not believe that this offering will have a
material effect on our capitalization. See Use of
Proceeds.
|
S-11
MANAGEMENT
Below you can find information about our current directors and
executive officers:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Glen F. Post, III
|
|
|
58
|
|
|
Chief Executive Officer and President
|
Karen A. Puckett
|
|
|
51
|
|
|
Executive Vice President and Chief Operating Officer
|
R. Stewart Ewing, Jr.
|
|
|
60
|
|
|
Executive Vice President, Chief Financial Officer and a Director
|
Stacey W. Goff
|
|
|
45
|
|
|
Executive Vice President, General Counsel and a Director
|
Dennis G. Huber
|
|
|
51
|
|
|
Executive Vice President Network Services
|
William E. Cheek
|
|
|
56
|
|
|
President Wholesale Operations
|
Christopher K. Ancell
|
|
|
49
|
|
|
President Business Markets Group
|
David D. Cole
|
|
|
53
|
|
|
Senior Vice President Controller and Operations
Support
|
Glen F. Post, III
, has served as our Chief Executive
Officer and President since April 1, 2011. Mr. Post
has served as Chief Executive Officer of CenturyLink since 1992,
and President of CenturyLink since July 1, 2009 (and from
1990 to 2002). Mr. Post also served as Chairman of the
Board of CenturyLink from June 2002 until June 2009, Vice
Chairman of the Board of CenturyLink between 1993 and 2002 and
held various other positions at CenturyLink between 1976 and
1993, most notably Treasurer, Chief Financial Officer and Chief
Operating Officer. Mr. Post received both his
Bachelors Degree and Masters Degree in Business
Administration from Louisiana Tech University.
Karen A. Puckett
, has served as our Executive Vice
President and Chief Operating Officer since April 1, 2011.
Ms. Puckett has served as CenturyLinks Executive Vice
President and Chief Operating Officer since July 2009, and
President and Chief Operating Officer of CenturyLink from
September 2002 until July 2009. Ms. Puckett holds her
Bachelors Degree from Indiana State University and a
Masters Degree in Business Administration from Bellarmine
College.
R. Stewart Ewing, Jr.
has served as our
Executive Vice President and Chief Financial Officer and a
member of our Board of Directors since April 1, 2011.
Mr. Ewing has served as CenturyLinks Executive Vice
President and Chief Financial Officer since 1999. Mr. Ewing
received his Bachelors Degree from Northwestern State
University.
Stacey W. Goff
has served as our Executive Vice President
and General Counsel and a member of our Board of Directors since
April 1, 2011. Mr. Goff has served as
CenturyLinks Executive Vice President, General Counsel and
Secretary since July 1, 2009, and Senior Vice President,
General Counsel and Secretary of CenturyLink prior to then.
Mr. Goff holds his Bachelors Degree from Mississippi
State University and his Juris Doctorate from the University of
Mississippi.
Dennis G. Huber
has served as our Executive Vice
President Network Services since April 1, 2011.
Mr. Huber has served as CenturyLinks Executive Vice
President Network Services since July 1, 2009
(excluding the four-month period between May 2010 and September
2010) and held various executive positions at Embarq and
its predecessor companies from January 2003 through July 1,
2009. Mr. Huber received both his Bachelors Degree
and Masters Degree from Rockhurst University.
William E. Cheek
has served as our President
Wholesale Operations since April 1, 2011. Mr. Cheek
has served as CenturyLinks President Wholesale
Operations since July 1, 2009. Previously, Mr. Cheek
served President Wholesale Markets for Embarq from
May 2006 until July 2009. Mr. Cheek received his
Bachelors Degree from Hendrix College.
S-12
Christopher K. Ancell
has served as President
Business Markets Group of CenturyLink and QC since April 1,
2011. Previously, Mr. Ancell served as QCIIs and our
Executive Vice President Business Markets Group from
August 2009 to April 2011 and QCIIs Vice President of
Sales, Western Region, for the Business Markets Group from 2004
to August 2009. Mr. Ancell holds a Bachelors Degree
in economics from the University of Denver.
David D. Cole
has served as our Senior Vice
President Controller and Operations Support since
April 1, 2011; Mr. Cole has served as
CenturyLinks Senior Vice President Operations
Support since 1999, and as Controller of CenturyLink since
April 1, 2011. Mr. Cole holds both his Bachelors
Degree and Masters Degree in Business Administration from
University of Louisiana at Monroe, Louisiana.
S-13
DESCRIPTION
OF THE NOTES
The following description of the Notes is only a summary and
is not intended to be comprehensive. We have filed the Indenture
referred to below as an exhibit to the registration statement
referred to under the caption Where You Can Find More
Information, and you may obtain a copy of it by following
the directions described therein. Our description of the Notes
below is qualified by reference to such Indenture, which we urge
you to read. As used in this section, QC,
we, us and our mean Qwest
Corporation, a Colorado corporation, and its successors, but not
any of its subsidiaries. Capitalized terms used but not
otherwise defined herein have the meanings assigned to them in
such Indenture, and those definitions are incorporated herein by
reference.
General
Subject to the discussion in this prospectus supplement, the
Notes:
|
|
|
|
|
will be issued under an indenture, dated as of October 15,
1999, between Qwest Corporation (formerly known as
U.S. WEST Communications, Inc.), as issuer, and Bank of New
York Trust Company, National Association (as successor in
interest to Bank One Trust Company), as previously amended
or supplemented from time to time, and as will be supplemented
by the eighth supplemental indenture thereto establishing the
terms of the Notes between Qwest Corporation, as issuer, and
U.S. Bank National Association, as trustee (the
Trustee) (as amended and supplemented, the
Indenture),
|
|
|
|
will be issued in the initial aggregate principal amount of
$500,000,000 (assuming no exercise of the over-allotment option
described herein),
|
|
|
|
will mature on September 15, 2051,
|
|
|
|
will be issued in minimum denominations of $25 and integral
multiples of $25 in excess thereof,
|
|
|
|
will be redeemable at our option, in whole or in part, at any
time on and after September 15, 2016, at a redemption price
equal to 100% of the principal amount redeemed plus accrued and
unpaid interest to the redemption date as described under
Redemption and Repayment below, and
|
|
|
|
are expected to be listed on the New York Stock Exchange.
|
None of QCs affiliates or any other person has guaranteed
the payment of principal, premium, if any, or interest on the
Notes or has any other obligation in connection with the Notes.
We or our affiliates may from time to time repurchase any of our
outstanding Notes offered hereunder by tender, in the open
market or by private agreement.
Further
Issuances
We may, without the consent of the holders of the Notes, issue
additional notes having the same ranking and the same stated
maturity date and other terms as these Notes (except the issue
price and issue date). Any such additional notes, together with
the Notes offered by this prospectus supplement, will constitute
a single series of debt securities under the Indenture.
Ranking
The Notes will be our senior unsecured obligations. The Notes
will rank senior to any of our future subordinated debt and rank
equally in right of payment with all of our existing and future
unsecured and unsubordinated debt. The Indenture does not limit
the aggregate principal amount of senior debt securities that we
may issue thereunder and provides that debt securities may be
issued thereunder from time to time in one or more series. As of
June 30, 2011, we owed approximately $7.8 billion
under unsecured and unsubordinated debt that would have ranked
equally with the Notes, most of which was issued under the
Indenture.
S-14
Trading
Characteristics
We expect the Notes to trade at a price that takes into account
the value, if any, of accrued and unpaid interest. This means
that purchasers will not pay, and sellers will not receive,
accrued and unpaid interest on the Notes that is not included in
their trading price. Any portion of the trading price of a Note
that is attributable to accrued and unpaid interest will be
treated as a payment of interest for U.S. federal income
tax purposes and will not be treated as part of the amount
realized for purposes of determining gain or loss on the
disposition of the Notes. See Material United States
Federal Income Tax Consequences below.
Quarterly
Payments
Interest on the Notes will accrue from September 21, 2011
at a rate of 7.50% per year and will be payable quarterly on
March 15, June 15, September 15 and
December 15 of each year (each, an Interest Payment
Date), beginning December 15, 2011. On an Interest
Payment Date, interest will be paid to the persons in whose
names the Notes were registered as of the record date. With
respect to any Interest Payment Date arising while the Notes
remain in book-entry form, the record date will be one business
day prior to the relevant Interest Payment Date.
The amount of interest payable for any period will be computed
on the basis of twelve
30-day
months and a
360-day
year. The amount of interest payable for any period shorter than
a full quarterly interest period will be computed on the basis
of the number of days elapsed in a
90-day
quarter of three
30-day
months. If any Interest Payment Date is a legal holiday in New
York, New York, the required payment will be made on the next
succeeding day that is not a legal holiday as if it were made on
the date such payment was due and no interest will accrue on the
amount so payable for the period from and after such Interest
Payment Date to such next succeeding day. Legal
holiday means a Saturday, a Sunday or a day on which
banking institutions in The City of New York are not required to
be open.
Redemption
and Repayment
The Notes will be redeemable at our option, in whole or in part,
at any time on and after September 15, 2016 upon not less
than 15 nor more than 60 days notice, at a redemption price
equal to 100% of the principal amount redeemed plus accrued and
unpaid interest to the redemption date.
Additionally, we may at any time repurchase the Notes at any
price in the open market and may hold, resell or surrender such
Notes to the Trustee for cancellation. You will not have the
right to require us to repay the Notes prior to maturity. We are
not required to establish a sinking fund to retire the Notes
prior to maturity.
Payment
Payment of principal of and interest on any Notes represented by
one or more permanent global notes in definitive, fully
registered form without interest coupons will be made to
Cede & Co., the nominee for The Depository
Trust Company (the Depositary) as the
registered owner of the global notes, by wire transfer of
immediately available funds. Initially, the Trustee will act as
paying agent for the Notes. Payments of principal and interest
on the Notes will be made by us through the paying agent to the
Depositary. See Book-Entry Only
Securities below.
Holders of certificated Notes, if any, must surrender such
certificated Notes to the paying agent to collect principal and
interest payments at maturity. Principal and interest on
certificated Notes will be payable at the office of the paying
agent maintained for such purpose or, at the option of QC,
payment of principal and interest may be made by check mailed to
a holders registered address. Notwithstanding the
foregoing, a holder of Notes with an aggregate principal amount
of $5 million or more may request in writing, at least
three business days prior to the relevant payment date, that
interest be wired to an account specified by such holder.
The principal of and interest on the Notes will be payable in
U.S. dollars or in such other coin or currency of the
United States of America as at the time of payment is legal
tender for the payment of public
S-15
and private debts. No service charge will be made for any
registration of transfer or exchange of Notes, but QC may
require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. The Notes
may be presented for registration of transfer or exchange at the
office of the registrar for the Notes or at any other office or
agency maintained by QC or the registrar for such purpose.
Initially, the Trustee will act as registrar for the Notes.
Certain
Covenants
Other than as described below under Limitation
on Liens, and Consolidation, Merger and
Sale of Assets, the Indenture does not contain any
provisions that would limit the ability of QC to incur
indebtedness or that would afford holders of Notes protection in
the event of a sudden and significant decline in the credit
quality of QC or a takeover, change of control, recapitalization
or highly leveraged or similar transaction involving QC.
Accordingly, QC could in the future enter into transactions that
could increase the amount of its indebtedness or otherwise
adversely affect QCs capital structure or credit rating.
See Risk Factors Risk Factors Relating to the
Notes.
Limitation
on Liens
The Indenture contains a covenant that if QC mortgages, pledges
or otherwise subjects to any Lien (other than Permitted Liens)
all or some of its property or assets, QC will secure the Notes,
any other outstanding debt securities under the Indenture and
any of its other obligations which may then be outstanding and
entitled to the benefit of a covenant similar in effect to such
covenant contained in the Indenture, equally and proportionally
with the indebtedness or obligations secured by such Lien, for
as long as any such indebtedness or obligation is so secured.
Lien means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any
kind, or any other type of preferential arrangement that has the
practical effect of creating a security interest, in respect of
such asset.
Permitted Liens
means any of the following:
|
|
|
|
|
Liens existing on the date of the initial issuance of the Notes;
|
|
|
|
Liens on any asset existing at the time such asset is acquired,
if not created in contemplation of such acquisition;
|
|
|
|
Liens on any asset (a) created within 180 days after
such asset is acquired, or (b) securing the cost of
acquisition, construction or improvement of such asset;
provided, in either case, that such Lien extends to no property
or asset other than the asset so acquired, constructed or
improved and property incidental thereto;
|
|
|
|
(a) Liens incidental to the conduct of QCs business
or the ownership of its properties or otherwise incurred in the
ordinary course of business which (i) do not secure Debt,
and (ii) do not in the aggregate materially detract from
the value of its assets taken as a whole or materially impair
the use thereof in the operation of its business, and
(b) Liens not described in clause (a) on cash, cash
equivalents or securities that secure any obligation with
respect to letters of credit or surety bonds or similar
arrangements, which obligation in each case does not exceed
$100 million;
|
|
|
|
any Lien to secure public or statutory obligations or with any
governmental agency at any time required by law in order to
qualify QC to conduct all or some part of its business or in
order to entitle QC to maintain self-insurance or to obtain the
benefits of any law relating to workmens compensation,
unemployment insurance, old age pensions or other social
security, or with any court, board, commission or governmental
agency as security incident to the proper conduct of any
proceeding before it;
|
|
|
|
any Liens for taxes, assessments, governmental charges, levies
or claims and similar charges either (a) not delinquent or
(b) being contested in good faith by appropriate
proceedings and as to which a reserve or other appropriate
provision, if any, as shall be required in conformity with
generally accepted accounting principles shall have been made;
|
S-16
|
|
|
|
|
Liens securing the performance of bids, tenders, leases,
contracts, sureties, stays, appeals, indemnities, performance or
similar bonds or public or statutory obligations of like nature,
incurred in the ordinary course of business;
|
|
|
|
materialmens, mechanics, repairmens, employees,
operators or other similar Liens or charges arising in the
ordinary course of business incidental to the acquisition,
construction, maintenance or operation of any asset of QC which
have not at the time been filed pursuant to law and any such
Liens and charges incidental to the acquisition, construction,
maintenance or operation of any asset of QC, which, although
filed, relate to obligations not yet due or the payment of which
is being withheld as provided by law, or to obligations the
validity of which is being contested in good faith by
appropriate proceedings;
|
|
|
|
zoning restrictions, servitudes, easements, licenses,
reservations, provisions, covenants, conditions, waivers,
restrictions on the use of property or minor irregularities of
title (and with respect to leasehold interests, mortgages,
obligations, Liens and other encumbrances incurred, created
assumed or permitted to exist and arising by, through or under
or asserted by a landlord or owner of the leased property, with
or without consent of the lessee) and other similar charges or
encumbrances, which will not individually or in the aggregate
interfere materially and adversely with the business of QC and
its subsidiaries taken as a whole;
|
|
|
|
Liens created by or resulting from any litigation or proceeding
which is currently being contested in good faith by appropriate
proceedings and as to which levy and execution have been stayed
and continue to be stayed or for which QC is maintaining
adequate reserves or other provision in conformity with
generally accepted accounting principles;
|
|
|
|
any interest or title of vendor or lessor in the property
subject to any lease, conditional sale agreement or other title
retention agreement;
|
|
|
|
Liens in connection with the securitization or factoring of
QCs or any of its subsidiaries receivables in a
transaction intended to be a true sale; and
|
|
|
|
any Lien securing a refinancing, replacement, extension, renewal
or refunding of any Debt secured by a Lien permitted by any of
the foregoing clauses of this definition of Permitted
Liens to the extent secured in all material respects by
the same asset or assets.
|
Notwithstanding the foregoing, Permitted Liens shall
not include any Lien to secure Debt that is required to be
granted on an equal and ratable basis under the negative
pledge, or equivalent, provisions of a Debt instrument
(including outstanding debt securities) as a result of the
creation of a Lien that itself would constitute a
Permitted Lien.
Debt
of any person means, at any date,
without duplication, (i) all obligations of such person for
borrowed money, (ii) all obligations of such person
evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such person as lessee
which are capitalized in accordance with generally accepted
accounting principles, (iv) all Debt secured by a Lien on
any asset of such person, whether or not such Debt is otherwise
an obligation of such person, and (v) all Debt of others
guaranteed by such person.
The Indenture does not prevent any other entity from mortgaging,
pledging or subjecting to any lien any of its property or
assets, whether or not acquired from QC.
Consolidation,
Merger and Sale of Assets
Under the Indenture, QC may not consolidate or merge with or
transfer or lease its property and assets substantially as an
entirety to another entity; provided that QC may consolidate or
merge with or transfer or lease its property and assets
substantially as an entirety to another entity if:
|
|
|
|
|
the successor entity is a corporation and assumes by
supplemental indenture all of QCs obligations under the
Notes, the Indenture and any other debt securities outstanding
under the Indenture; and
|
|
|
|
after giving effect to the transaction, no default or Event of
Default has occurred and is continuing.
|
S-17
Events of
Default
Any one of the following is an Event of Default with
respect to the Notes:
|
|
|
|
|
if QC defaults in the payment of interest on the Notes, and such
default continues for 90 days;
|
|
|
|
if QC defaults in the payment of the principal of the Notes when
the same becomes due and payable upon maturity, upon redemption
or otherwise;
|
|
|
|
if QC fails to comply with any of its other agreements with
respect to the Notes or in the Indenture, which failure
continues for 90 days after QC receives notice from the
Trustee or the holders of at least 25% of the aggregate
principal amount of the Notes then outstanding; and
|
|
|
|
if certain events of bankruptcy or insolvency occur with respect
to QC.
|
If an Event of Default with respect to the Notes occurs and is
continuing, the Trustee or the holders of at least 25% in
aggregate principal amount of the Notes then outstanding may
declare the principal of the Notes to be due and payable
immediately. The holders of a majority in principal amount of
the Notes may rescind such declaration and its consequences if
the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived
except nonpayment of principal or interest that has become due
solely as a result of such acceleration.
Holders of Notes may not enforce the Indenture or the Notes,
except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or
the Notes. Subject to certain limitations, the holders of more
than 50% in aggregate principal amount of the Notes then
outstanding may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred upon the Trustee. The
Trustee may withhold from holders of Notes notice of any
continuing default (except a default in the payment of principal
or interest) if it determines that withholding notice is in
their interests.
Amendment
and Waiver
With the written consent of the holders of a majority in
principal amount of the debt securities of each series issued
under the Indenture then outstanding (with each series
(including the Notes) voting as a class), QC and the Trustee may
amend or supplement the Indenture or modify the rights of the
holders of the Notes; provided that any such amendment that
affects the terms of the Notes as distinct from the other series
of debt securities issued under the Indenture will require only
the consent of at least a majority in aggregate principal amount
of the Notes then outstanding. Such majority holders may also
waive compliance by QC of any provision of the Indenture, any
supplemental indenture or the Notes, except a default in the
payment of principal or interest. However, without the consent
of the holder of each Note affected, an amendment or waiver may
not:
|
|
|
|
|
reduce the amount of Notes whose holders must consent to an
amendment or waiver;
|
|
|
|
change the rate or the time for payment of interest;
|
|
|
|
change the principal or the fixed maturity;
|
|
|
|
waive a default in the payment of principal or interest;
|
|
|
|
make the Notes payable in a different currency; or
|
|
|
|
make any change in the provisions of the Indenture concerning
(a) waiver of existing defaults, (b) rights of holders
of Notes to receive payment or (c) amendments and waivers
without the consent of the holder of each Note affected.
|
QC and the Trustee may amend or supplement the Indenture without
the consent of any holder of any of the Notes to:
|
|
|
|
|
cure any ambiguity, defect or inconsistency in the Indenture or
the Notes;
|
S-18
|
|
|
|
|
provide for the assumption of all of our obligations under the
Notes and the Indenture by any corporation in connection with a
merger, consolidation or transfer or lease of our property and
assets substantially as an entirety;
|
|
|
|
provide for uncertificated Notes in addition to or instead of
certificated Notes;
|
|
|
|
add to the covenants made by us for the benefit of the holders
of any series of debt securities, including the Notes (and if
such covenants are to be for the benefit of less than all series
of debt securities, stating that such covenants are included
solely for the benefit of such series) or to surrender any right
or power conferred upon us;
|
|
|
|
add to, delete from, or revise the conditions, limitations, and
restrictions on the authorized amount, terms, or purposes of
issue, authentication and delivery of the Notes, as set forth in
the Indenture;
|
|
|
|
secure any Notes as provided under the heading
Certain Covenants Limitation on
Liens;
|
|
|
|
provide for the issuance of and establish the form and terms and
conditions of a series of debt securities or to establish the
form of any certifications required to be furnished pursuant to
the terms of the Indenture or any series of debt securities or
to add to the rights of the holders of any series of debt
securities; or
|
|
|
|
make any change that does not adversely affect the rights of any
holder of the Notes in any material respect.
|
Defeasance
QC may terminate all of its obligations under the Notes and the
Indenture or any installment of principal or interest on the
Notes if QC irrevocably deposits in trust with the Trustee money
or U.S. government obligations sufficient to pay, when due,
principal and interest on the Notes to maturity or redemption or
such installment of principal or interest, as the case may be,
and if all other conditions set forth in the Indenture are met.
Governing
Law
The Indenture and the Notes are governed by, and will be
construed in accordance with, the laws of the State of New York.
Concerning
the Trustee and the Paying Agent
QC and certain of its affiliates maintain banking and other
business relationships in the ordinary course of business with
U.S. Bank National Association. In addition, U.S. Bank
National Association and certain of its affiliates serve as
trustee, authenticating agent, or paying agent with respect to
certain other debt securities of QC and its affiliates.
Book-Entry
Only Securities
The Notes will be issued only in book-entry form through the
facilities of the Depositary and will be in denominations of $25
and integral multiples of $25 in excess thereof. The Notes will
be represented by one or more Global Securities (Global
Securities) and will be registered in the name of a
nominee of the Depositary. Holders of the Notes may elect to
hold interests in a Global Security through the Depositary,
Clearstream Banking,
societe anonyme
(Clearstream) or Euroclear Bank S.A./N.V., as
operator of the Euroclear System (Euroclear), if
they are participants of such systems, or indirectly through
organizations which are participants in such systems.
Clearstream and Euroclear will hold interests on behalf of their
participants through customers securities accounts in
Clearstream and Euroclears names on the books of their
respective depositaries, which in turn will hold such interests
in customers securities accounts in the depositaries
names on the Depositarys books.
S-19
The Depositary has advised us that it is a limited-purpose trust
company organized under the New York Banking Law, a
banking organization within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a
clearing corporation within the meaning of the New
York Uniform Commercial Code, and a clearing agency
registered pursuant to the provisions of section 17A of the
Exchange Act. The Depositary holds securities that its
participants (Direct Participants) deposit with the
Depositary. The Depositary also facilitates the settlement among
its Direct Participants of securities transactions, such as
transfers and pledges, in deposited securities through
electronic computerized book-entry changes in its
participants accounts, thereby eliminating the need for
physical movement of securities. The Depositarys Direct
Participants include securities brokers and dealers (including
the underwriters), banks, trust companies, clearing
corporations, and certain other organizations. The Depositary is
owned by The Depository Trust & Clearing Corporation,
which is owned by the users of its regulated subsidiaries.
Access to the Depositarys system is also available to
others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or
indirectly (Indirect Participants). The rules
applicable to the Depositary and its Direct and Indirect
Participants are on file with the SEC.
Clearstream advises that it is incorporated under the laws of
Luxembourg as a bank. Clearstream holds securities for its
customers and facilitates the clearance and settlement of
securities transactions between its customers through electronic
book-entry transfers between their accounts. Clearstream
provides to its customers among other things, services for
safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and
borrowing. Clearstream interfaces with domestic securities
markets in over 30 countries through established depository and
custodial relationships. As a bank, Clearstream is subject to
regulation by the Luxembourg Commission for the Supervision of
the Financial Sector, also known as the Commission de
Surveillance du Secteur Financier. Its customers are recognized
financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. Its customers in
the United States are limited to securities brokers and dealers
and banks. Indirect access to Clearstream is also available to
other institutions such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial
relationship with the customer.
Euroclear advises that it was created in 1968 to hold securities
for its participants and to clear and settle transactions
between Euroclear participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the
need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Euroclear
provides various other services, including securities lending
and borrowing and interfaces with domestic markets in several
countries. Euroclear is operated by Euroclear Bank S.A./N.V.
Euroclear Clearance establishes policy for Euroclear on behalf
of Euroclear participants. Euroclear participants include banks,
including central banks, securities brokers and dealers and
other professional financial intermediaries and may include the
initial purchasers. Indirect access to Euroclear is also
available to other firms that clear through or maintain a
custodial relationship with a Euroclear participant, either
directly or indirectly. Securities clearance accounts and cash
accounts with the Euroclear operator are governed by the terms
and conditions governing use of Euroclear and the related
operating procedures of Euroclear. These terms and conditions
govern transfers of securities and cash within Euroclear,
withdrawals of securities and cash from Euroclear, and receipts
of payments with respect to securities in Euroclear. All
securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities
clearance accounts. The Euroclear operator acts under the terms
and conditions only on behalf of Euroclear participants and has
no record of or relationship with persons holding through
Euroclear participants.
Euroclear further advises that investors that acquire, hold and
transfer interests in the Notes by book-entry through accounts
with the Euroclear operator or any other securities intermediary
are subject to the laws and contractual provisions governing
their relationship with their intermediary, as well as the laws
and contractual provisions governing the relationship between
such an intermediary and each other intermediary, if any,
standing between themselves and the Global Securities.
Purchases of Global Securities under the Depositary system must
be made by or through Direct Participants, which will receive a
credit for the Global Securities on the Depositarys
records. The beneficial
S-20
interest of each actual purchaser of each Global Security (a
Beneficial Owner) is in turn to be recorded on the
records of the respective Direct Participant and Indirect
Participant and Clearstream and Euroclear will credit on its
book-entry registration and transfer system the number of Notes
sold to certain
non-U.S. persons
to the account of institutions that have accounts with
Euroclear, Clearstream or their respective nominee participants.
Beneficial Owners will not receive written confirmation from the
Depositary of their purchase, but Beneficial Owners are expected
to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings,
from the Direct Participant or Indirect Participant through
which the Beneficial Owner entered into the transaction.
Title to book-entry interests in the Notes will pass by
book-entry registration of the transfer within the records of
Clearstream, Euroclear or the Depositary, as the case may be, in
accordance with their respective procedures. Book-entry
interests in the Notes may be transferred within Clearstream and
within Euroclear and between Clearstream and Euroclear in
accordance with procedures established for these purposes by
Clearstream and Euroclear. Book-entry interests in the Notes may
be transferred within the Depositary in accordance with
procedures established for this purpose by the Depositary.
Transfers of book-entry interests in the Notes among Clearstream
and Euroclear and the Depositary may be effected in accordance
with procedures established for this purpose by Clearstream,
Euroclear and the Depositary.
Payments of the principal of, premium, if any, and interest on
the Notes represented by the Global Securities registered in the
name of and held by the Depositary or its nominee will be made
to the Depositary or its nominee, as the case may be, as the
registered owners and holder of the Global Securities.
Conveyance of notices and other communications by the Depositary
to Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect
Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither the Depositary nor any other nominee of the Depositary
will consent or vote with respect to the Global Securities.
Under its usual procedures, the Depositary mails an Omnibus
Proxy to us as soon as possible after the record date. The
Omnibus Proxy assigns the Depositarys consenting or voting
rights to those Direct Participants to whose accounts the Global
Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy). Principal, premium, if
any, and interest payments in respect of the Global Securities
will be made to the Depositary or any other nominee as may be
requested by an authorized representative of the Depositary. the
Depositarys practice is to credit Direct
Participants accounts, upon the Depositarys receipt
of funds and corresponding detail information from us or the
trustee on the payment date in accordance with their respective
holdings shown on the Depositarys records. Payments by
Direct Participants and Indirect Participants to Beneficial
Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts
of customers in bearer form or registered in street
name, and will be the responsibility of each such Direct
or Indirect Participant and not that of the Depositary, the
trustee or us, subject to any statutory or regulatory
requirements as may be in effect from time to time. Principal,
premium, if any, and interest payments in respect of the Global
Securities to the Depositary or other nominee requested by an
authorized representative of the Depositary) is our
responsibility, disbursement of such payments to Direct
Participants will be the responsibility of the Depositary and
disbursement of such payments to the Beneficial Owners will be
the responsibility of Direct Participants and Indirect
Participants.
The laws of some states require that certain persons take
physical delivery of securities in definitive form.
Consequently, the ability to transfer beneficial interests in a
Global Security to those persons may be limited. In addition,
because the Depositary can act only on behalf of Direct
Participants, which, in turn, act on behalf of Indirect
Participants and certain banks, the ability of a person having a
beneficial interest in a Global Security to pledge that interest
to persons or entities that do not participate in the Depositary
system, or otherwise take actions in respect of that interest,
may be affected by the lack of a physical certificate evidencing
that interest.
Initial settlement for the Notes will be made in immediately
available funds. Secondary market trading between the Depositary
participants will occur in the ordinary way in accordance with
the Depositarys rules
S-21
and will be settled in immediately available funds using the
Depositarys
same-day
funds settlement system. Secondary market trading between
Clearstream customers
and/or
Euroclear participants will occur in the ordinary way in
accordance with the applicable rules and operating procedures of
Clearstream and Euroclear and will be settled using the
procedures applicable to conventional eurobonds in immediately
available funds.
Cross-market transfers between persons holding directly or
indirectly through the Depositary on the one hand, and directly
or indirectly through Clearstream customers or Euroclear
participants, on the other, will be effected in the Depositary
in accordance with the Depositarys rules on behalf of the
relevant European international clearing system by its
U.S. depositary; however, such cross-market transactions
will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system
in accordance with its rules and procedures and within its
established deadlines, in European time. The relevant European
international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its
U.S. depository to take action to effect final settlement
on its behalf by delivering interests in the Notes to or
receiving interests in the Notes from the Depositary, and making
or receiving payment in accordance with normal procedures for
same-day
funds settlement applicable to the Depositary. Clearstream
customers and Euroclear participants may not deliver
instructions directly to their respective U.S. Depositaries.
Because of time-zone differences, credits of interests in the
Notes received by Clearstream or Euroclear as a result of a
transaction with a the Depositary participant will be made
during subsequent securities settlement processing and dated the
business day following the Depositary settlement date. Such
credits or any transactions involving interests in such Notes
settled during such processing will be reported to the relevant
Clearstream customers or Euroclear participants on such business
day. Cash received by Clearstream or Euroclear as a result of
sales of interests in the Notes by or through a Clearstream
customer or a Euroclear participant to a the Depositary
participant will be received with value on the Depositary
settlement date but will be available in the relevant
Clearstream or Euroclear cash account only as of the business
day following settlement in the Depositary.
Although the Depositary, Clearstream and Euroclear have each
agreed to the foregoing procedures in order to facilitate
transfers of interests in the Notes among their participants,
they are under no obligation to perform or continue to perform
such procedures and such procedures may be changed or
discontinued at any time.
The Global Security may not be transferred except as a whole to
another nominee of the Depositary or to a successor Depositary
selected or approved by us or to a nominee of that successor
Depositary. A Global Security is exchangeable for definitive
notes in registered form in authorized denominations only if:
|
|
|
|
|
the Depositary notifies us that it is unwilling or unable to
continue as Depositary and a successor Depositary is not
appointed by us within 90 days;
|
|
|
|
the Depositary ceases to be a clearing agency registered or in
good standing under the Exchange Act, or other applicable
statute or regulation and a successor corporation is not
appointed by us within 90 days; or
|
|
|
|
we, in our sole discretion, determine not to require that all of
the Notes be represented by a Global Security.
|
The information in this section has been obtained from sources
that we believe to be reliable, but neither we nor the
underwriters take any responsibility for the accuracy thereof.
S-22
MATERIAL
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the material United States
federal income tax consequences of the purchase, ownership and
disposition of the Notes, but does not purport to be a complete
analysis of all potential tax considerations. This section is
based on the Internal Revenue Code of 1986, as amended (the
Code), its legislative history, existing regulations
under the Code, published rulings and court decisions, all as
currently in effect on the date hereof. These laws and
interpretations are subject to change, possibly on a retroactive
basis. No assurance can be given that the Internal Revenue
Service (IRS) will agree with the views expressed in
this summary, or that a court will not sustain any challenge by
the IRS in the event of litigation.
Unless otherwise stated, this summary deals only with Notes held
as capital assets within the meaning of Section 1221 of the
Code (generally, assets held for investment) by holders that
purchase Notes in this offering at the offering price. The tax
treatment of a holder may vary depending on that holders
particular situation. This summary does not address all of the
tax consequences that may be relevant to holders that may be
subject to special tax treatment such as, for example, insurance
companies, broker-dealers, tax-exempt organizations, certain
financial institutions, real estate investment trusts, traders
in securities that elect to use a
mark-to-market
method of accounting, regulated investment companies, persons
holding Notes as part of a straddle, hedge, constructive sale,
conversion transaction or other integrated transaction for
U.S. federal income tax purposes, persons holding Notes
through a partnership or other pass-through entity or
arrangement, U.S. holders whose functional currency is not
the U.S. dollar, certain former U.S. citizens or
long-term residents, persons that acquire their Notes in
connection with employment or other performance of personal
services, retirement plans (including individual retirement
accounts and tax-deferred accounts), and persons subject to the
alternative minimum tax. In addition, this summary does not
address any aspects of state, local, or foreign tax laws or any
U.S. federal tax considerations (e.g., estate or gift tax)
other than U.S. federal income tax considerations, that may
be applicable to particular holders.
If a partnership (including for this purpose any entity or
arrangement treated as a partnership for U.S. federal
income tax purposes) is a beneficial owner of a Note, the tax
treatment of a partner in the partnership will generally depend
upon the status of the partner and upon the activities of the
partnership. A holder of a Note that is a partnership and any
partners in such partnership should consult their own tax
advisors.
Each holder is urged to consult its own tax advisor to
determine the federal, state, local, foreign and other tax
consequences of the purchase, ownership and disposition of the
Notes in the light of its own particular circumstances. This
summary of the material United States federal income tax
considerations is for general information only and is not tax
advice.
U.S.
Holders
For purposes of this summary, the term
U.S. holder means a beneficial owner of a Note
that is, for United States federal income tax purposes:
|
|
|
|
|
an individual citizen or resident of the United States,
including an alien individual who is a lawful permanent resident
of the United States or who meets the substantial presence test
under Code Section 7701(b);
|
|
|
|
a legal entity (1) created or organized in or under the
laws of the United States, any state in the United States
or the District of Columbia and (2) treated as a
corporation for United States federal income tax purposes;
|
|
|
|
an estate the income of which is subject to United States
federal income taxation regardless of its source; or
|
|
|
|
a trust if (1) a court within the United States is able to
exercise primary supervision over the administration of the
trust and one or more United States persons have the authority
to control all
|
S-23
|
|
|
|
|
substantial decisions of the trust or (2) the trust has in
effect a valid election to be treated as a domestic trust for
United States federal income tax purposes.
|
Stated
Interest on the Notes
Generally, stated interest on a Note will be includible in a
U.S. holders gross income and taxable as ordinary
income for U.S. federal income tax purposes at the time
such interest is paid or accrued in accordance with such
holders regular method of tax accounting. It is
anticipated that the Notes will be issued without original issue
discount or, if issued at a discount from the principal amount
of the Notes, with an amount of discount that is less than the
statutory
de minimis
amount.
Sale,
Exchange, Redemption or Retirement of a Note
Each U.S. holder generally will recognize capital gain or
loss upon a sale, exchange, redemption, retirement or other
taxable disposition of a Note measured by the difference, if
any, between (i) the amount of cash and the fair market
value of any property received (except to the extent that the
cash or other property received in respect of a Note is
attributable to the payment of accrued interest on the Note,
which amount will be treated as a payment of interest) and
(ii) the U.S. holders adjusted tax basis in the
Note. The gain or loss will be long-term capital gain or loss if
the Note has been held for more than one year at the time of the
sale, exchange, redemption, retirement or other taxable
disposition. Long-term capital gains of non-corporate holders
may be eligible for reduced rates of taxation. The deductibility
of capital losses by both corporate and non-corporate holders is
subject to limitations. A U.S. holders adjusted basis
in a Note generally will be the amount paid for the Note reduced
by any principal payments received on the Note.
Recent
Legislation Unearned Income Medicare
Contribution
Recently enacted legislation requires certain U.S. holders
who are individuals, estates or trusts to pay an additional 3.8%
Medicare tax on unearned income for taxable years beginning
after December 31, 2012. This tax would apply to interest
on and capital gains from the sale or other disposition of a
Note. U.S. holders should consult their tax advisors
regarding the effect, if any, of this legislation on the
ownership or disposition of a Note.
Information
Reporting and Backup Withholding
Information reporting will generally apply to reportable
payments, including interest and principal on a Note, to
U.S. holders that are not exempt recipients (such as
individuals). In addition, backup withholding will apply if the
U.S. holder, among other things, (i) fails to furnish
a social security number or other taxpayer identification number
(TIN) certified under penalties of perjury within a
reasonable time after the request therefor, (ii) furnishes
an incorrect TIN, (iii) fails to properly report the
receipt of interest or dividends or (iv) under certain
circumstances, fails to provide a certified statement, signed
under penalties of perjury, that the TIN furnished is the
correct number and that the holder is not subject to backup
withholding. A U.S. holder that does not provide its
correct TIN also may be subject to penalties imposed by the IRS.
The current backup withholding rate is 28%. That rate is
scheduled to increase to 31% beginning January 1, 2013.
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules from a payment to a
U.S. holder generally will be allowed as a refund or as a
credit against that holders U.S. federal income tax
liability, provided the requisite procedures are followed.
U.S. holders are encouraged to consult their tax advisors
as to their qualification for exemption from backup withholding
and the procedure for obtaining such exemption.
Information reporting and backup withholding will not apply with
respect to payments made to exempt recipients (such
as corporations and tax-exempt organizations) provided, if
requested, their exemptions from backup withholding are properly
established.
S-24
Non-U.S.
Holders
The following discussion applies to you if you are a beneficial
owner of a Note other than a U.S. holder as defined above
or a partnership or other entity or arrangement treated as a
partnership for U.S. federal income tax purposes (a
non-U.S. holder).
Special rules may apply to you or your shareholders if you are a
controlled foreign corporation or passive
foreign investment company. You should consult your own
tax advisor to determine the United States federal, state, local
and other tax consequences that may be relevant to you in your
particular circumstances.
Payments
of Interest on the Notes
Under the portfolio interest exemption, the 30%
U.S. federal withholding tax that is generally imposed on
interest from United States sources should not apply to any
payment of principal or interest (including original issue
discount) on the Notes, provided that:
|
|
|
|
|
you do not conduct a trade or business within the United States
to which the interest is effectively connected;
|
|
|
|
you do not actually or constructively own 10% or more of the
total combined voting power of all classes of our stock that are
entitled to vote within the meaning of the Code and the
U.S. Treasury regulations;
|
|
|
|
you are not a controlled foreign corporation that is related to
us through stock ownership;
|
|
|
|
you are not a bank whose receipt of interest on the Notes is
described in section 881(c)(3)(A) of the Code; and
|
|
|
|
you fully and properly execute an IRS
Form W-8BEN
(or a suitable substitute form), and certify, under penalties of
perjury, that you are not a United States person; or a qualified
intermediary holding the Notes on your behalf provides us with
an IRS Form
W-8IMY
(or a
suitable substitute form) that, among other things, certifies
that it has determined that you are not a U.S. person.
|
Special certification and other rules apply to certain
non-U.S. holders
that are pass-through entities rather than individuals.
We do not intend to withhold on payments of interest on the
Notes if the above requirements are met.
If you cannot satisfy the requirements described above, interest
payments made to you on the Notes generally will be subject to
the 30% United States federal withholding tax. If a treaty
applies, however, you may be eligible for a reduced rate of, or
exemption from, withholding. Interest payments on the Notes that
are effectively connected with your conduct of a trade or
business within the United States are not subject to the 30%
withholding tax, but instead are generally subject to United
States federal income tax, on a net income basis, as described
below. In order to claim any such exemption or reduction in the
30% withholding tax, you should provide a properly executed IRS
Form W-8BEN
(or a suitable substitute form) claiming a reduction of or an
exemption from withholding under an applicable tax treaty or IRS
Form W-8ECI
(or a suitable substitute form) stating that such payments are
not subject to withholding because they are effectively
connected with your conduct of a trade or business in the United
States. Such forms are available on the IRS website at
www.irs.gov
. You may be required to update these forms
periodically. Special procedures are provided under applicable
U.S. Treasury regulations for payments through qualified
intermediaries or certain financial institutions that hold
customers Notes in the ordinary course of their trade or
business.
Except to the extent provided by an applicable income tax
treaty, if you are engaged in a trade or business in the United
States (and, if a tax treaty applies, you maintain a permanent
establishment within the United States) and interest on the
Notes is effectively connected with the conduct of that trade or
business (and if a treaty applies, attributable to that
permanent establishment), you will be subject to United States
federal income tax (but not the 30% withholding tax described
above) on such income on a net income basis in generally the
same manner as if you were a U.S. person. In addition, if
you are a foreign corporation, you may be subject to an
additional branch profits tax at a 30% rate (or such lower rate
or exemption as may be
S-25
specified by an applicable tax treaty), which is generally
imposed on a foreign corporation on the actual and deemed
repatriation from the United States of earnings and profits
attributable to a United States trade or business.
Sale,
Exchange, Redemption or Retirement of a Note
Any gain or income realized on the disposition of a Note
generally will not be subject to United States federal income
tax unless (1) that gain or income is effectively connected
with your conduct of a trade or business in the United States;
or (2) you are an individual who is present in the United
States for 183 days or more in the taxable year of that
disposition, and certain other conditions are met.
Except to the extent provided by an applicable income tax
treaty, gain that is effectively connected with the conduct of a
U.S. trade or business will be subject to U.S. federal
income tax on a net basis at the rates applicable to
U.S. persons generally (and, if you are a corporation, may
also be subject to the 30% branch profits tax described above
unless reduced or exempted by an applicable income tax treaty).
Except to the extent provided by an applicable income tax
treaty, if you are an individual present in the United States
for 183 days or more in the taxable year and meet certain
other conditions, then you will be subject to U.S. federal
income tax at a rate of 30% on the amount by which capital gains
from U.S. sources (including gains from the sale or other
disposition of the Notes) exceed capital losses allocable to
U.S. sources.
Information
Reporting and Backup Withholding
Generally, if you are a
non-U.S. holder
we or our agent must report annually to you and to the IRS the
amount of any payments of interest to you, your name and
address, and the amount of tax withheld, if any. Copies of the
information returns reporting those interest payments and
amounts withheld may be available to the tax authorities in the
country in which you reside under the provisions of any
applicable income tax treaty or exchange of information
agreement.
If you provide the applicable IRS
Form W-8BEN,
IRS
Form W-8IMY
or other applicable form, together with all appropriate
attachments, signed under penalties of perjury, identifying
yourself and stating that you are not a United States person,
you generally will not be subject to U.S. backup
withholding with respect to interest payments (provided that
neither our Company nor our agent knows or has reason to know
that you are a U.S. person or that the conditions of any
other exemptions are not in fact satisfied).
Under current Treasury Regulations, payments on the sale,
exchange, redemption or other taxable disposition of a note made
to or through a U.S. office of a broker generally will be
subject to information reporting and backup withholding unless
you either certify your status as a
non-U.S. holder
under penalties of perjury on the applicable IRS
Form W-8BEN,
IRS
Form W-8IMY
or other applicable form (as described above) or otherwise
establish an exemption. The payment of the proceeds on the
disposition of a note by you to or through a
non-U.S. office
of a
non-U.S. broker
generally will not be subject to backup withholding or
information reporting. However, the payment of proceeds on the
disposition of a note to or through a
non-U.S. office
of a U.S. broker or a U.S. Related Person (as defined
below) generally will be subject to information reporting (but
not backup withholding) unless you certify your status as a
non-U.S. holder
under penalties of perjury or otherwise establish an exemption,
or unless the broker has certain documentary evidence in its
files as to your foreign status and has no actual knowledge or
reason to know that you are a U.S. person or that the
conditions of any other exemptions are not in fact satisfied.
For this purpose, a U.S. Related Person is
(i) a controlled foreign corporation for
U.S. federal income tax purposes, (ii) a foreign
person 50% or more of whose gross income from all sources for a
specified three-year period is derived from activities that are
effectively connected with the conduct of a U.S. trade or
business, (iii) a foreign partnership with certain
connections to the United States, or (iv) a
U.S. branch of a foreign bank or insurance company.
S-26
Backup withholding is not an additional tax and may be refunded
(or credited against the holders U.S. federal income
tax liability, if any), provided that certain required
information is timely furnished to the IRS. You should consult
your own tax advisor as to the application of withholding and
backup withholding in your particular circumstance and your
qualification for obtaining an exemption from backup withholding
and information reporting under current Treasury regulations.
THE PRECEDING DISCUSSION OF CERTAIN MATERIAL
U.S. FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL
INFORMATION ONLY AND IS NOT TAX ADVICE. WE URGE EACH PROSPECTIVE
INVESTOR TO CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR NOTES, INCLUDING
THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.
S-27
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. LLC, UBS Securities LLC and Wells
Fargo Securities, LLC are acting as representatives of the
underwriters named below.
Subject to the terms and conditions in the underwriting
agreement dated the date of this prospectus supplement, each
underwriter named below has severally agreed to purchase, and we
have agreed to sell to that underwriter, the principal amount of
the Notes set forth opposite the underwriters name.
|
|
|
|
|
|
|
Principal
|
|
|
|
Amount of
|
|
Underwriters
|
|
Notes
|
|
|
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
|
|
$
|
98,750,000
|
|
Morgan Stanley & Co. LLC
|
|
|
98,750,000
|
|
UBS Securities LLC
|
|
|
98,750,000
|
|
Wells Fargo Securities, LLC
|
|
|
98,750,000
|
|
J.P. Morgan Securities LLC
|
|
|
25,000,000
|
|
RBC Capital Markets, LLC
|
|
|
25,000,000
|
|
SunTrust Robinson Humphrey, Inc.
|
|
|
7,500,000
|
|
U.S. Bancorp Investments, Inc.
|
|
|
7,500,000
|
|
Ameriprise Financial Services, Inc.
|
|
|
2,500,000
|
|
Fifth Third Securities, Inc.
|
|
|
2,500,000
|
|
JJB Hilliard, WL Lyons LLC
|
|
|
2,500,000
|
|
Janney Montgomery Scott LLC
|
|
|
2,500,000
|
|
Mizuho Securities USA Inc.
|
|
|
2,500,000
|
|
Morgan Keegan & Company, Inc.
|
|
|
2,500,000
|
|
Oppenheimer & Co. Inc.
|
|
|
2,500,000
|
|
Stifel, Nicolaus & Company, Incorporated
|
|
|
2,500,000
|
|
The Williams Capital Group, L.P.
|
|
|
2,500,000
|
|
BB&T Capital Markets, a division of Scott &
Stringfellow, LLC
|
|
|
1,250,000
|
|
B.C. Ziegler & Co.
|
|
|
1,250,000
|
|
City Securities Corporation
|
|
|
1,250,000
|
|
C.L. King
|
|
|
1,250,000
|
|
D.A. Davidson & Co.
|
|
|
1,250,000
|
|
Davenport & Company LLC
|
|
|
1,250,000
|
|
Halliday (HRC Investments)
|
|
|
1,250,000
|
|
Keefe, Bruyette & Woods, Inc.
|
|
|
1,250,000
|
|
KeyBanc Capital Markets Inc.
|
|
|
1,250,000
|
|
Mesirow Financial, Inc.
|
|
|
1,250,000
|
|
Robert W. Baird & Co. Incorporated
|
|
|
1,250,000
|
|
Sterne, Agee & Leach, Inc.
|
|
|
1,250,000
|
|
Wedbush Securities Inc.
|
|
|
1,250,000
|
|
William Blair & Company, LLC
|
|
|
1,250,000
|
|
|
|
|
|
|
Total
|
|
$
|
500,000,000
|
|
|
|
|
|
|
The underwriting agreement provides that the obligations of the
underwriters to purchase the Notes included in this offering are
subject to approval of legal matters by counsel and to other
conditions. The underwriters are obligated to purchase all the
Notes if they purchase any of the Notes.
S-28
The underwriters propose to offer some of the Notes directly to
the public at the price to public set forth on the cover page of
this prospectus supplement and some of the Notes to dealers at
the price to public less a concession not to exceed $0.50 per
Note; provided, however, that such concession for sales to
certain institutions will not be in excess of $0.30 per Note.
The underwriters may allow, and dealers may reallow, a
concession not to exceed $0.45 per Note on sales to other
dealers; provided, however, that such concession for sales to
certain institutions will not be in excess of $0.25 per Note on
sales to other dealers. After the initial offering of the Notes
to the public, the representatives may change the price to
public and concessions.
In connection with this offering, we have agreed to pay to the
underwriters an underwriting discount (expressed as a percentage
of the principal amount of the Notes) of 3.15%. However, the
amount of the underwriting discount (expressed as a percentage
of the principal amount of the Notes) to be paid by us to the
underwriters in connection with this offering for sales to
certain institutions is 2.00%.
Prior to this offering, there has been no public market for the
Notes. We intend to list the Notes on the New York Stock
Exchange and expect trading in the Notes on the New York Stock
Exchange to begin within 30 days after the Notes are first
issued. In order to meet one of the requirements for listing the
Notes, the underwriters will undertake to sell the Notes to a
minimum of 400 beneficial holders.
The Notes are a new issue of securities with no established
trading market. The underwriters have advised us that they
intend to make a market in the Notes but are not obligated to do
so and may discontinue market making at any time without notice.
Neither we nor the underwriters can assure you that the trading
market for the Notes will be liquid.
We have granted the underwriters an option, exercisable within
30 days from the date of this prospectus supplement, to
purchase up to an additional $75,000,000 aggregate principal
amount of the Notes at the price to public set forth on the
cover page of this prospectus supplement less the underwriting
discount. To the extent the option is exercised, each
underwriter will become obligated to purchase approximately the
same percentage of the additional Notes as the underwriter
purchased in the original offering. If the underwriters
option is exercised in full, and assuming no additional sales to
certain institutions in connection with the exercise of this
option, the total price to the public would be $575,000,000, the
total underwriting discount would be $17,864,333 and total
proceeds, before deducting expenses, to us would be $557,135,667.
In connection with this offering, the representatives, on behalf
of the underwriters, may purchase and sell the Notes in the open
market. These transactions may include over-allotment, syndicate
covering transactions and stabilizing transactions.
Over-allotment involves syndicate sales of the Notes in excess
of the principal amount of the Notes to be purchased by the
underwriters in the offering, which creates a syndicate short
position. Syndicate covering transactions involve purchase of
the Notes in the open market after the distribution has been
completed in order to cover syndicate short positions.
Stabilizing transactions consist of certain bids or purchases of
the Notes made for the purpose of preventing or retarding a
decline in the market price of the Notes while the offering is
in progress.
The representatives also may impose a penalty bid. Penalty bids
permit the underwriters to reclaim a selling concession from a
syndicate member when the representatives, in covering syndicate
short positions or making stabilizing purchases, repurchase the
Notes originally sold by that syndicate member.
Any of these activities may have the effect of preventing or
retarding a decline in the market price of the Notes. They may
also cause the price of the Notes to be higher than the price
that otherwise would exist in the open market in the absence of
these transactions. The underwriters may conduct these
transactions in the
over-the-counter
market or otherwise. If the underwriters commence any of these
transactions, they may discontinue them at any time.
We estimate that our total expenses for this offering, not
including the underwriting discount, will be approximately
$400,000.
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a
Relevant Member State), each underwriter has
represented and agreed that with effect from and including the
date on which the Prospectus Directive is implemented in that
Relevant Member State (the Relevant Implementation
Date) it has not made and will not make an offer of Notes
which are the
S-29
subject of the offering contemplated by this prospectus
supplement and the accompanying prospectus to the public in that
Relevant Member State other than:
(a) to any legal entity which is a qualified investor as
defined in the Prospectus Directive;
(b) to fewer than 100 or, if the Relevant Member State has
implemented the relevant provision of the 2010 PD Amending
Directive, 150, natural or legal persons (other than qualified
investors as defined in the Prospectus Directive), as permitted
under the Prospectus Directive, subject to obtaining the prior
consent of the representatives of the underwriters for any such
offer; or
(c) in any other circumstances falling within
Article 3(2) of the Prospectus Directive,
provided that no such offer of Notes shall require us or any
underwriter to publish a prospectus pursuant to Article 3
of the Prospectus Directive. For the purposes of this provision,
the expression an offer of notes to the public in
relation to any Notes in any Relevant Member State means the
communication in any form and by any means of sufficient
information on the terms of the offer and the Notes to be
offered so as to enable an investor to decide to purchase the
Notes, as the same may be varied in that Member State by any
measure implementing the Prospectus Directive in that Member
State.
This prospectus supplement and accompanying prospectus have been
prepared on the basis that any offer of Notes in any Relevant
Member State will be made pursuant to an exemption under the
Prospectus Directive from the requirement to publish a
prospectus for offers of Notes. Accordingly, any person making
or intending to make an offer in that Relevant Member State of
Notes which are the subject of the placement contemplated in
this prospectus supplement and the accompanying prospectus may
only do so in circumstances in which no obligation arises for us
or any of the underwriters to publish a prospectus pursuant to
Article 3 of the Prospectus Directive, in each case, in
relation to such offer. Neither we nor the underwriters have
authorised, nor do they authorise, the making of any offer of
Notes in circumstances in which an obligation arises for us or
the underwriters to publish a prospectus for such offer.
The expression Prospectus Directive means Directive
2003/71/EC (and amendments thereto, including the 2010 PD
Amending Directive, to the extent implemented in the Relevant
Member State), and includes any relevant implementing measure in
the Relevant Member State and the expression 2010 PD
Amending Directive means Directive 2010/73/EU.
This prospectus supplement and the accompanying prospectus are
only being distributed to, and are only directed at,
(1) persons who are outside the United Kingdom or
(2) investment professionals falling within
Article 19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005 (the Order) or
(3) high net worth entities, and other persons to whom it
may lawfully be communicated, falling within
Article 49(2)(a) to (d) of the Order (each such person
being referred to as a relevant person). The Notes
are only available to, and any invitation, offer or agreement to
subscribe for, purchase or otherwise acquire the Notes will be
engaged in only with, relevant persons. Any person who is not a
relevant person should not act or rely on this prospectus
supplement or the accompanying prospectus or any of their
contents.
Each underwriter has represented and agreed that:
(a) it has only communicated or caused to be communicated
and will only communicate or cause to be communicated an
invitation or inducement to engage in investment activity
(within the meaning of Section 21 of the Financial Services
and Markets Act 2000 (FSMA) received by it in
connection with the issue or sale of the Notes in circumstances
in which Section 21(1) of the FSMA does not apply to
us; and
(b) it has complied and will comply with all applicable
provisions of the FSMA with respect to anything done by it in
relation to the Notes in, from or otherwise involving the United
Kingdom.
The underwriters have performed investment banking and advisory
services for us and our affiliates from time to time for which
they have received customary fees and expenses. The underwriters
may, from time to time, engage in transactions with and perform
services for us and our affiliates in the ordinary course of
their business. In addition, certain underwriters or their
affiliates may provide credit to us and our affiliates as
lenders, including as lenders under CenturyLinks
$1.7 billion revolving credit facility.
S-30
In addition, in the ordinary course of their business
activities, the underwriters and their affiliates may make or
hold a broad array of investments and actively trade debt and
equity securities (or related derivative securities) and
financial instruments (including bank loans) for their own
account and for the accounts of their customers. Such
investments and securities activities may involve securities
and/or
instruments of ours or our affiliates. Certain of the
underwriters or their affiliates that have a lending
relationship with us routinely hedge their credit exposure to us
consistent with their customary risk management policies.
Typically, such underwriters and their affiliates would hedge
such exposure by entering into transactions which consist of
either the purchase of credit default swaps or the creation of
short positions in our securities, including potentially the
Notes offered hereby. Any such short positions could adversely
affect future trading prices of the Notes offered hereby. The
underwriters and their affiliates may also make investment
recommendations
and/or
publish or express independent research views in respect of such
securities or financial instruments and may hold, or recommend
to their clients that they acquire, long
and/or
short
positions in such securities and instruments.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act, or
to contribute to payments the underwriters may be required to
make because of any of these liabilities.
It is expected that delivery of the Notes will be made on or
about the date specified on the cover page of this prospectus
supplement, which will be the fifth business day following the
date of this prospectus supplement. Under
Rule 15c6-1
of the SEC under the Exchange Act, trades in the secondary
market generally are required to settle in three business days,
unless the parties to any such trade expressly agree otherwise.
Accordingly, the purchasers who wish to trade the Notes on the
date of this prospectus supplement or the next succeeding
business day will be required to specify an alternate settlement
cycle at the time of any such trade to prevent failed settlement.
Purchasers of the Notes who wish to trade the Notes on the date
of this prospectus supplement or the next succeeding business
day should consult their own advisors.
EXPERTS
The consolidated financial statements of Qwest Corporation as of
December 31, 2010 and 2009 and for each of the years in the
three-year period ended December 31, 2010, have been
incorporated by reference herein in reliance upon the reports of
KPMG LLP, independent registered public accounting firm,
incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
LEGAL
MATTERS
Jones, Walker, Waechter, Poitevent, Carrère &
Denègre, L.L.P., New Orleans, Louisiana, and Margaret E.
McCandless, our internal legal counsel, will pass on certain
legal matters for us relating to the offering of the Notes.
Pillsbury Winthrop Shaw Pittman LLP, New York, New York, will
pass on certain legal matters for the underwriters.
S-31
PROSPECTUS
QWEST
COMMUNICATIONS INTERNATIONAL INC.
QWEST
CORPORATION
QWEST
SERVICES CORPORATION, as Guarantor
QWEST
CAPITAL FUNDING, INC., as Guarantor
Debt
Securities
Preferred Stock
Common Stock
Purchase Contracts
Depositary Shares
Guarantees of Debt Securities
Warrants
Units
By this prospectus, QCII, QC, QSC and QCF may from time to time
offer securities to the public. We will provide specific terms
of these securities in supplements to this prospectus. You
should read this prospectus and each applicable supplement
carefully before you invest. Any QCII debt securities we issue
under this prospectus may be guaranteed by QSC
and/or
QCF,
direct wholly-owned subsidiaries of QCII.
QCIIs common stock is listed on the New York Stock
Exchange under the ticker symbol Q.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representations to the contrary are a criminal
offense.
This prospectus may not be used to sell our securities unless it
is accompanied by the applicable prospectus supplement.
You should rely only on the information incorporated by
reference or provided in this prospectus or any prospectus
supplement. We have not authorized anyone else to provide you
with different information or to make additional
representations. We are not making or soliciting an offer of any
securities other than the securities described in this
prospectus and any prospectus supplement. We are not making or
soliciting an offer of these securities in any state or
jurisdiction where the offer is not permitted or in any
circumstances in which such offer or solicitation is unlawful.
You should not assume that the information contained or
incorporated by reference in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the
front of those documents.
Investing in our securities involves a high degree of risk.
See Risk Factors contained in the applicable
prospectus supplement.
We will sell these securities directly, or through agents,
dealers or underwriters as designated from time to time, or
through a combination of these methods. We reserve the sole
right to accept, and together with our agents, dealers and
underwriters reserve the right to reject, in whole or in part,
any proposed purchase of securities to be made directly or
through agents, underwriters or dealers. If any agents, dealers
or underwriters are involved in the sale of any securities, the
relevant prospectus supplement will set forth any applicable
commissions or discounts. Our net proceeds from the sale of
securities also will be set forth in the relevant prospectus
supplement.
The date of this prospectus is December 12, 2008.
TABLE OF
CONTENTS
|
|
|
|
|
Page
|
|
|
|
ii
|
|
|
ii
|
|
|
iii
|
|
|
iv
|
|
|
1
|
|
|
2
|
|
|
2
|
|
|
2
|
|
|
2
|
i
ABOUT
THIS PROSPECTUS
This prospectus is part of a registration statement that QCII,
QC, QSC, and QCF filed with the Securities and Exchange
Commission (the SEC) using a shelf
registration or continuous offering process. Under this
registration statement, we may sell any combination of the
securities described in this prospectus from time to time,
either separately or in units, in one or more offerings.
Each time we sell any securities under this prospectus, we will
provide a prospectus supplement containing specific information
about the terms of that offering. That prospectus supplement may
also add, update or change information contained in this
prospectus. If there is any inconsistency between the
information contained in this prospectus and any information
incorporated by reference herein, on the one hand, and the
information contained in any applicable prospectus supplement
and any information incorporated by reference therein, on the
other hand, you should rely on the information in the applicable
prospectus supplement or incorporated by reference therein. You
should read both this prospectus and any prospectus supplement
together with the additional information described under the
heading Where You Can Find More Information. The
registration statement containing this prospectus, including the
exhibits to the registration statement, provides additional
information about us and the securities offered under this
prospectus. The registration statement, including the exhibits,
can be read at the SECs website or at the SECs
offices mentioned under the heading Where You Can Find
More Information.
As used in this prospectus, unless the context otherwise
requires or indicates:
|
|
|
|
|
QCII refers to Qwest Communications International
Inc., a Delaware corporation;
|
|
|
|
QC refers to Qwest Corporation, a Colorado
corporation, which is a direct subsidiary of QSC and an indirect
subsidiary of QCII;
|
|
|
|
QSC refers to Qwest Services Corporation, a Colorado
corporation, which is a direct subsidiary of QCII;
|
|
|
|
QCF refers to Qwest Capital Funding, Inc., a
Colorado corporation, which is a direct subsidiary of
QCII; and
|
|
|
|
Qwest, the Company, we,
us, and our or similar terms refer to
QCII and its consolidated subsidiaries, including QC, QSC and
QCF.
|
WHERE YOU
CAN FIND MORE INFORMATION
QCII files annual, quarterly and current reports, proxy
statements and other information with the SEC. QC files annual,
quarterly and current reports with the SEC. You may access and
read QCIIs and QCs SEC filings, including the
complete registration statement and all exhibits to it, over the
Internet at the SECs web site at
http://www.sec.gov
.
This uniform resource locator is included in this prospectus as
an inactive textual reference only. Unless specifically listed
under Incorporation By Reference below, the
information contained on the SEC website is not intended to be
incorporated by reference in this prospectus and you should not
consider that information a part of this prospectus.
You may read and copy any document QCII or QC files with the SEC
at the SECs Public Reference Room located at
450 Fifth Street, N.W., Washington, D.C. 20549. You
may also request copies of the documents that QCII or QC files
with the SEC by writing to the SECs Public Reference Room,
450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Please call the SEC at
1-800-SEC-0330
for further information on the operation of the Public Reference
Room and copying charges.
QCIIs SEC filings are also available at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York,
NY 10005. We also post QCIIs and QCs SEC filings on
our website at
http://www.qwest.com
.
Our website address is included in this prospectus as an
inactive textual reference only. Information contained on our
website is not intended to be incorporated by reference in this
prospectus and you should not consider that information a part
of this prospectus.
ii
INCORPORATION
BY REFERENCE
The SEC allows us to incorporate by reference the
information we file with it, which means we can disclose
important information to you by referring you to other documents
that contain that information. The information incorporated by
reference is an important part of this prospectus. Any
information that we file with the SEC in the future and
incorporate by reference will automatically update and supersede
the information contained or incorporated by reference in this
prospectus.
QCII (File
No. 001-15577)
filed the following documents with the SEC and incorporates them
by reference into this prospectus:
|
|
|
|
|
the description of its common stock contained in its
Form 8-A
filed December 27, 1999, including any amendment or report
filed for the purpose of updating this description;
|
|
|
|
its Annual Report on
Form 10-K
for the year ended December 31, 2007, filed on
February 12, 2008 (QCIIs 2007
10-K),
which incorporates by reference certain portions of its proxy
statement dated April 4, 2008;
|
|
|
|
its Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2008, filed on May 6,
2008, its Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2008, filed on
August 6, 2008, and its Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2008, filed on
October 29, 2008 (QCIIs 2008
10-Qs); and
|
|
|
|
its Current Reports on
Form 8-K
filed January 28, 2008, February 12, 2008,
February 26, 2008, April 4, 2008 (two filed on this
date), May 6, 2008, July 29, 2008, August 20,
2008, and September 15, 2008.
|
QC (File
No. 001-03040)
filed the following documents with the SEC and incorporates them
by reference into this prospectus:
|
|
|
|
|
its Annual Report on
Form 10-K
for the year ended December 31, 2007, filed on
February 12, 2008 (QCs 2007
10-K);
|
|
|
|
its Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2008, filed on May 6,
2008, its Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2008, filed on
August 6, 2008, and its Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2008, filed on
October 30, 2008 (QCs 2008
10-Qs); and
|
|
|
|
its Current Report on
Form 8-K
filed April 4, 2008.
|
All documents that QCII and QC file with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 (the Exchange Act) after the
date of this prospectus and prior to the termination of all
offerings made pursuant to this prospectus also will be deemed
to be incorporated herein by reference and will automatically
update information in this prospectus. Nothing in this
prospectus shall be deemed to incorporate information furnished
but not filed with the SEC, including information furnished
pursuant to Item 2.02 or Item 7.01 of
Form 8-K.
Statements made in this prospectus, in any prospectus supplement
or in any document incorporated by reference in this prospectus
as to the contents of any contract or other document are not
necessarily complete. In each instance we refer you to the copy
of the contract or other document filed as an exhibit to the
registration statement of which this prospectus is a part or as
an exhibit to the documents incorporated by reference.
We will provide to you, at no cost, a copy of any document
incorporated by reference in this prospectus and any exhibits
specifically incorporated by reference in those documents. You
may request copies of these filings from us by mail at the
following address: Corporate Secretary, Qwest Communications
International Inc., 1801 California Street, Denver, Colorado
80202, or by telephone at the following telephone number:
(303) 992-1400.
QSC and QCF are consolidated wholly owned subsidiaries of QCII.
Under SEC rules, QSC and QCF are not required to file separate
reports with the SEC, although certain consolidated financial
information about QSC and QCF can be found in the footnotes to
QCIIs financial statements.
iii
FORWARD-LOOKING
STATEMENTS
This prospectus contains or incorporates by reference
forward-looking statements about our financial condition,
results of operations and business. These statements include,
among others:
|
|
|
|
|
statements concerning the benefits that we expect will result
from our business activities and certain transactions we have
completed, such as increased revenue, decreased expenses and
avoided expenses and expenditures; and
|
|
|
|
statements of our expectations, beliefs, future plans and
strategies, anticipated developments and other matters that are
not historical facts.
|
These statements may be made expressly in this prospectus or may
be incorporated by reference to other documents we file with the
SEC. You can find many of these statements by looking for words
such as may, would, could,
should, plan, believes,
expects, anticipates,
estimates, or similar expressions used in this
prospectus or incorporated by reference in this prospectus.
These forward looking statements are subject to numerous
assumptions, risks and uncertainties that may cause our actual
results to be materially different from any future results
expressed or implied by us in those statements. Some of these
risks are described under Risk Factors and in
Managements Discussion and Analysis of Financial
Condition and Results of Operations in QCIIs 2007
10-K,
QCIIs 2008
10-Qs,
QCs 2007
10-K
and
QCs 2008
10-Qs.
These risk factors should be considered in connection with any
subsequent written or oral forward-looking statements that we or
persons acting on our behalf may issue. Given these
uncertainties, we caution investors not to unduly rely on our
forward-looking statements. We do not undertake any obligation
to review or confirm analysts expectations or estimates or
to release publicly any revisions to any forward-looking
statements to reflect events or circumstances after the date of
this prospectus or to reflect the occurrence of unanticipated
events. Further, the information contained in this prospectus is
a statement of our intention as of the date of this prospectus
and is based upon, among other things, the existing regulatory
environment, industry conditions, market conditions and prices,
the economy in general and our assumptions as of such date. We
may change our intentions, at any time and without notice, based
upon any changes in such factors, in our assumptions or
otherwise.
iv
THE
COMPANY
QCII provides voice, data, Internet and video services
nationwide and globally. We continue to generate the majority of
our revenue from services provided in the 14-state region of
Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska,
New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington
and Wyoming. We refer to this region as our local service area.
QC, among other things, operates the regulated local
telephone business of its ultimate parent, QCII. Its operations
generally account for the majority of Qwests consolidated
revenue.
QSC is the direct corporate parent of QC and Qwest
Communications Corporation, the entity through which Qwest
conducts substantially all of its unregulated business.
QCF facilitates the obtaining of debt financing for Qwests
affiliates.
Corporate
Information
QCII, a Delaware corporation, was incorporated on
February 18, 1997. QCII will be the issuer of the
securities to be sold pursuant to this prospectus other than any
debt securities issued by QC and any guarantees issued by QSC
and QCF.
QC, a Colorado corporation, was incorporated on
July 17, 1911. QC may be an issuer of debt securities to be
sold pursuant to this prospectus. QSC is the direct corporate
parent of QC.
QSC, a Colorado corporation, was incorporated on
January 16, 1996. QSC may be the issuer of guarantees of
QCII debt securities issued pursuant to this prospectus. QCII is
the direct corporate parent of QSC.
QCF, a Colorado corporation, was incorporated on June 10,
1986. QCF may be the issuer of guarantees of QCII debt
securities issued pursuant to this prospectus. QCII is the
direct corporate parent of QCF.
The principal executive offices of QCII, QC, QSC and QCF are
located at 1801 California Street, Denver, Colorado 80202, and
their telephone number is
(303) 992-1400.
The following chart illustrates the corporate structure of QCII
and its consolidated subsidiaries, including the co-registrants.
This chart is provided for illustrative purposes only and does
not represent all legal entities of QCII and its consolidated
subsidiaries.
1
USE OF
PROCEEDS
Unless otherwise indicated in an accompanying prospectus
supplement, the net proceeds we expect to receive from the sale
of the securities will be used for general corporate purposes,
which may include, among others, the following:
|
|
|
|
|
reduction or refinancing of existing debt;
|
|
|
|
making capital investments;
|
|
|
|
funding working capital requirements; and
|
|
|
|
funding possible acquisitions and investments.
|
Pending any specific application, net proceeds may initially be
invested in short-term marketable securities or applied to the
reduction of short-term indebtedness.
RATIO OF
EARNINGS TO FIXED CHARGES
The following table sets forth QCIIs and QCs
consolidated ratio of earnings to fixed charges for the nine
months ended September 30, 2008 and each of the five years
ended December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Year Ended December 31,
|
|
Ratio of Earnings to Fixed Charges(a)
|
|
September 30, 2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
QCII
|
|
|
1.9
|
|
|
|
1.5
|
|
|
|
1.4
|
|
|
|
|
(b)
|
|
|
|
(b)
|
|
|
|
(b)
|
QC
|
|
|
4.4
|
|
|
|
4.6
|
|
|
|
3.7
|
|
|
|
3.3
|
|
|
|
3.7
|
|
|
|
3.7
|
|
|
|
|
(a)
|
|
Earnings for purposes of this ratio are unaudited
and are computed by adding income (loss) before income taxes,
discontinued operations, cumulative effect of changes in
accounting principles and fixed charges (excluding capitalized
interest). Fixed charges consist of interest
(including capitalized interest) on indebtedness and an interest
factor on rentals.
|
|
(b)
|
|
Earnings were inadequate to cover fixed charges by
$759 million, $1,705 million and $1,837 million
for the years ended December 31, 2005, 2004 and 2003,
respectively.
|
LEGAL
MATTERS
Certain legal matters on behalf of QCII, QC, QSC and QCF will be
passed upon for us by Stephen E. Brilz, Esq. If legal
matters in connection with offerings made by this prospectus are
passed on by other counsel for us or by counsel for the
underwriters of an offering of the securities, that counsel will
be named in the applicable prospectus supplement.
EXPERTS
The consolidated financial statements and the related
consolidated financial statement schedule of Qwest
Communications International Inc. and Qwest Corporation as of
December 31, 2007 and 2006, and for each of the years in
the three-year period ended December 31, 2007, and
managements assessment of the effectiveness of internal
controls over financial reporting of Qwest Communications
International Inc. as of December 31, 2007, have been
incorporated by reference herein in reliance upon the reports of
KPMG LLP, independent registered public accounting firm,
incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The audit reports covering the consolidated financial statements
of Qwest Communications International Inc. and Qwest Corporation
as of December 31, 2007 and 2006, and for each of the years
in the three-year period ended December 31, 2007, refer to
the adoption of certain new accounting standards.
2
$500,000,000
Qwest Corporation
7.50% Notes due
2051
PROSPECTUS SUPPLEMENT
Joint Book-Running Managers
|
|
|
|
BofA
Merrill Lynch
|
Morgan Stanley
|
UBS
Investment Bank
|
Fargo
Securities
|
Lead Managers
|
|
J.P. Morgan
|
RBC Capital Markets
|
Co-Managers
|
|
SunTrust
Robinson Humphrey
|
US Bancorp
|
September 14, 2011
Qwest Corp. 7.375% Notes Due 2051 (NYSE:CTQ)
Historical Stock Chart
From Sep 2024 to Oct 2024
Qwest Corp. 7.375% Notes Due 2051 (NYSE:CTQ)
Historical Stock Chart
From Oct 2023 to Oct 2024