Bankers expect Metromedia Fiber Network to come to market with a high-yield bond deal in lieu of syndicating the $350 million bank credit Citigroup underwrote for the company two weeks ago. A banker close to the deal said the company will issue debt off of its $1.5 billion shelf registration rather than syndicate the credit in response to the recent rally in the high-yield debt markets. "It's not an issue of pricing necessarily, but a high-yield deal provides them with more flexibility," he said, noting that many high-yield companies may opt for the bond market to avoid covenants associated with bank loans. "The company has no plans to syndicate or draw down on the credit or shelf," said an official at Metromedia. The official confirmed that if launched pricing on the credit stands between LIBOR plus 23Ž 4% and 3%. Citigroup declined to comment.
A banker said he is not surprised with the plans as the company has a history of replacing bank deals with bond deals. "Two years ago they did the bait and switch. They signed up and launched a bank deal which made the company look like it had more liquidity to do better with a bond deal," he said. The official at Metromedia confirmed that the company launched a $350 million credit in 1998 that was replaced with a bond deal. "We were going to do commercial but high-yield was so oversubscribed that we set the bank deal aside," he said. The company is looking to fill in the last piece of its funding. According to a recent Securities and Exchange Commission filing, the company's current business plan calls for 3.6 million fiber miles and approximately one million square feet of data center space.