American Standard Inc.'s two-part $650 million offering was three times oversubscribed, a source familiar with the issue said yesterday.
"It was a blowout," he said, citing "over $2 billion in orders for only $650 million worth of bonds."
The deal also came in under the price talk, the source said, which means the company was able to borrow at a cheaper rate than initially expected.
The first part of the issue consisted of $200 million of 9.875% senior subordinated notes due 2001, callable after five years at 102.82.
The second piece, proceeds of which totaled $450 million, consisted of senior subordinated discount debentures priced at 59.948 to yield 10.50%. The debentures are callable after five years at 104.66, moving to par in 2002. They pay no interest for five years.
If American Standard completes an initial public stock offering of at least $250 million within the first three years, it can call 35% of the discount debentures, beginning at 110.5 in the first year, 109.33 in the second and 108.16 in the third year.
The offering is rated B1 by Moody's and B by Standard & Poor's. BT Securities Corp. was lead manager, and First Boston Corp. was the co-manager.
"At the price, the coupons were more popular than the discounts," he said.
Both pieces came in under price talk. Talk on the 9.875% notes had been 10%, while the talk on the zeros was 10 3/4%. American Standard plans to use proceeds from the offering and an upcoming $1 billion bank facility to retire existing debt, the source said. Proceeds from yesterday's offering will be used to call $545 million of 12 7/8% debt and $56 million of 14 1/4% debt. The company plans to use $850 million of the $1 billion it can borrow under the bank facility to call $315 million of its 14 1/4% debt and retire and existing facility. Fees for calling the debt early will total approximately $45 million, he said.
With American Standard taking about $1 billion of its debt out of the market and putting only $650 million back in, it was an "easy decision" for portfolio managers who were having their old debt called away to participate in the new offering, the source said.
The company is also well placed from a competitive standpoint, being either number one or number two in nearly all of its markets, he said.
Management also did a good job of selling investors on its story during the offering's marketing phase, the source said.
"It's a very compelling story," he said.
American Standard has spent more than $800 million in capital investment in the last three years, the source said.
"It has poured a ton of money into new technology and especially manufacturing," he said. The company has three principal business segments: Air conditioning, plumbing fixtures, and braking systems.
Elsewhere, Warner Communications, a Time Warner Inc. subsidiary, has called for redemption of all of its roughly $117 million of 10 7/8% subordinated debentures due June 1, 1995, according to a Time Warner release.
The subsidiary plans to redeem the debentures on June 23 at a price of 100% of their principal amount plus accrued interest to the redemption date.
Paramount Communications Inc. also announced a redemption yesterday. in a release, the company said it will call on July 1 all $100 million of its 8 1/2% senior notes due July 1, 1996. The company plans to redeem the notes at 100% of the principal amount, plus interest up to July 1.
Also yesterday, International Business Machines announced plans to issue $750 million of perpetual preferred stock as part of its plan to issue up to $3 billion of long-term debt and preferred stock during the next nine months to a year.
The Securities and Exchange Commission yesterday declared a registration statement for the securities effective, IBM said in a release.
The Armonk-based company will use proceeds from the sale of the perpetual preferred stock and the new debt for general corporate purposes.
Full details of the $750 million offering will be announced when pricing is completed, the release says.
"It's really in the process of being priced now," Rob Wilson, an IBM spokesman said yesterday.
The shares are being offering by underwriters led by Lehman Brothers.
In the ongoing E-II Holdings Inc. saga, Carl Icahn in a statement confirmed that, together with Ametek Inc., he planned to bid in bankruptcy court yesterday afternoon for of all E-II's operating assets.
The financier opposes E-II's reorganization plan, which was scheduled for a confirmation hearing yesterday.
Icahn and Ametek have reached an agreement under which Ametek would bid $265 million for Culligan International Co. and Icahn would bid for Samsonite Inc. and McGregor Inc.
Mr. Icahn said in a statement yesterday that "the bids we are making today will conclusively show the high values which E-II can obtain for its subsidiaries and that, at these values, the E-II plan of reorganization is, as previously charged by Icahn, unconfirmable because it still undervalues E-II's assets and will give senior debt-holders more than there claim."
In secondary trading yesterday, high-yield issues were off 1/4 to 1/2 during the morning but gained strength to finish unchanged from Friday's close. Activity was light, however.
Spreads on high-grade bonds were unchanged.
New issues and Ratings
BankAmerica Corp. issued $350 million of 6 7/8% subordinated notes due June 1, 2003. The noncallable notes were price at 99.401 to yield 6.96% or 80 basis points over comparable Treasuries. Moody's rates the offering A3, while Standard & Poor's and Duff & Phelps Credit Rating Co. rates it A-minus. J.P. Morgan Securities Inc. was lead manager for the offering.
Standard & Poor's downgraded IMO Industries Inc. senior subordinated debt to B-minus from B-plus and removed the rating from CreditWatch where it was placed Nov. 9. The implied senior rating is B-plus.
The action affects about $300 million of debt.
"The downgrade reflects tight financial constraints under recently renegotiated lenders' agreements," Standard & Poor's said in its release.
"Lawrenceville, N.J.-based Imo is anticipated to be modestly profitable in 1993, and management is tightening internal controls and will divest subpar operations and use proceeds to retire debt. However, soft sales activity , in combination with an aggressive financial posture, is anticipated to afford only mediocre cash flow generation and, consequently, limited financial flexibility," Standard & Poor's said.
