UCC Investors Holding Inc. plans to erase three series of high-cost debt with proceeds from a $750 million offering scheduled for early next year, the company said.
The Connecticut-based company, parent of Uniroyal Chemical Co., yesterday announced it plans to issue the three part public offering in the first quarter. The proposed deal hinges on a number of factors, including the interest rate environment and obtaining approval from some banks and other institutional lenders, a UCC release says.
The offering will consist of $300 million principal amount of senior notes due to 2002, $325 million principal amount of senior subordinate notes due 2003, and $125 million initial accredited value of subordinated discount notes due 2005, the release says. Morgan Stanley $ Co. will underwrite the offering.
UCC will use proceeds to retire its 14% senior discount notes due 1999 at 109.35% of accreted value. It also plans to retire the 13.5% senior subordinated notes due 1997 of Uniroyal Chemical Acquisition Corp., an indirect, wholly owned subsidiary of UCC Investors, at 107.71% of principal amount. In addition, it plans to retire the 14.25% subordinated notes due 1998 of UCAC at 108.91% of principal amount. The remaining proceeds will be used to pay fees and for general corporate purposes.
In the release, Robert J. Mazaika, Uniroyal Chemical's president and chief executive officer, said the proposed refinancing was aimed at improving the company's operating and financial flexibility by reducing its future interest costs, extending the maturity on a good portion of its debt, and increasing liquidity. The transaction would also simplify the company's existing holding company structure.
Mazaika could not be reached for further comment yesterday.
The offering announced yesterday comes after the company pulled a combination initial public offering and debt deal last spring, one high-yield source said yesterday.
Although he was not specifically asked about UCC's proposed offering, one high-yield portfolio manager said his desk is "stacked to the hilt" with prospectuses. But he said few appeal to him.
"The quality of the new deals doesn't meet my standards," he said.
In secondary trading, high-yield bonds ended about 1/4 point higher. Spreads on high-grade issues finished unchanged to "a touch better," one high-grade trader said. The trader described activity in that market as "quiet to moderately busy."
New Issues
Chrysler Financial Corp. on Wednesday issued $400 million of 9.5% senior notes due 1999 at par. The noncallable notes were priced to yield 310 basis points over comparable Treasuries. Moody's Investors Service rates the offering Ba2, while Standard & Poor's Corp. rates it B-plus. Merrill Lynch lead managed the offering.
Federal Home Loan Mortgage Corp. yesterday issued $250 million of 5.37% medium-term notes due 1995 at par. Noncallable for a year, the notes were priced to yield 21 basis points over comparable Treasuries. Lehman Brothers sole managed the offering.
Federal Home Loan Mortgage Corp. yesterday issued $100 million of 7.23% debentures priced initially at par. Callable after five years, the notes were priced to yield 49 basis points over comparable Treasuries. Bear, Stearns & Co. sole managed the offering.
Ohio Bell yesterday issued $100 million of 7.850% first mortgage bonds due 2022. Noncallable for 10 years, the bonds were priced at 99.678 to yield 7.878% or 45 basis points over comparable Treasuries. Moody's and Standard & Poor's rate the offering triple-A. Lehman Brothers won competitive bidding to underwrite the offering.
Rating News
Moody's yesterday downgraded some of the credit ratings of Sears, Roebuck and Co. and its subsidiaries.
Commercial paper ratings were unaffected.
"The rating actions are based on Allstate's [a Sears Roebuck subsidiary] weakened capital position resulting from losses caused by Hurricane Andrew, continuing problems in the Merchandise Group, and loss of cash flow and future financial flexibility resulting from planned asset sales and spin-offs," a Moody's release says.
"Moreover, these asset sales and spin-offs will leave Sears, Roebuck and Co. debt holders and lenders more dependent on the performance of the Merchandise Group and on dividends from a smaller ownership in Allstate," the report notes.
The action by Moody's, which affects about $11 billion of Sears securities and $4 billion of its subsidiaries' long-term debt, concludes the review it began on Sept. 11.
Among the securities downgraded were Sears Roebuck's senior debt to Baal from A3, preferred stock to "baa2" from "baal," 415 debt shelf registration to (P)Baal from (P)A3, and 415 shelf registration for preferred stock to (P) "baa2" from (P) "baa1."
Moody's also lowered the insurance financial strength ratings of Allstate Insurance Co. and Allstate Life Insurance Co. to Aa3 from Aa2.
