American Medical Joins Other Issuers In Seeking to Refinance Expensive Debt
American Medical International Inc. yesterday announced plans to sell $100 million of senior notes, becoming the latest high-yield issuer seeking to refinance expensive debt.
The company was tempted to the market by "the opportunity to get some capital at attractive rates," according to Don Galletly, a spokesman for American Medical. Mr. Galletly said the company filed a registration statement with the Securities and Exchange Commission yesterday.
The offering follows a $210 million issue of 13 1/2% senior subordinated notes due 2001, which closed Aug. 22, he said.
American Medical plans to use proceeds from the $100 million issue due 2000 to redeem its 12 1/4% senior notes due 1994 and to repurchase other senior debt, unnamed as yet, Mr. Galletly said. About $30 million of the original $100 million 12 1/4% note issue remains outstanding, he added.
Clare Schiedermayer, a Bear, Stearns & Co. analyst, said American Medical's outlook has improved substantially since the company used proceeds from the 13 1/2% senior subordinated note issue and equity to remove a $470 million bridge loan from its books. The loan, held by First Boston Corp., carried 16 3/4% interest, she said.
Moody's Investors Service rates the company's senior debt Baa3, while Standard & Poor's Corp. assigns it a B-plus. Moody's rates its senior subordinated debt B-2, and Standard & Poor's assigns a B-minus, Mr. Galletly said.
First Boston, Merrill Lynch & Co., and Salomon Brothers Inc. will co-manage the offering. They also managed the $210 million issue, Mr. Galletly said.
Steven L. Patricola, a high-yield analyst at BT Securities Inc., said American Medical joins several other companies - including Varity Corp., P&C Food Markets Inc., Amphenol Corp., and Stone Container Corp. - in seeking to refinance debt in the current market. Most of the high-yield transactions seen or expected this year have been refinancings, he said.
American Medical International, a wholly owned subsidiary of American Medical Holdings Inc., operates 38 hospitals, primarily acute care, in 12 states.
Also yesterday, Chase Manhattan Co. sold $80 million of its $100 million junk bond portfolio on its way to exiting the market altogether, a spokesman there said.
"We are not trying to time the market. It's merely a decision not to be active in this particular market," he said. The spokesman emphasized that the sale has nothing to do with Chase Securities Inc., a Chase subsidiary.
Over all yesterday, both the high-yield and high-grade markets were off about 1/8 point, traders said.
Wells Fargo & Co. yesterday tapped the investment-grade market for $150 million of three-year notes. The notes carried a 7 5/8% coupon and were priced at 99.724 to yield 7.73% or 135 basis points over comparable Treasuries. Moody's rates the deal A2, while Standard & Poor's rates it A-minus.
In the private-placement market. Nord Resources Corp. said it planned to sell $20 million of 8% convertible debentures to an international mining company, Susan A. Shahan, director of shareholder relations at Dayton, Ohio-based Nord, said.
The debentures are convertible into Nord common stock at 10% above the market price of Nord at the closing date, with a maximum price of $8.80 and a minimum of $6.60, Ms. Shahan said.
Alternatively at the purchaser's option, the debentures can convert into about 20% of Sierra Rutile Limited, a wholly owned Nord subsidiary. Issuance hinges on signing a definitive agreement between Nord and the buyer. The target date for closing is Oct. 31.