Essex Industries Inc. yesterday sweetened its tender offer for Amstar Corp. junk bonds, as high-yield sources predicted it would.
The company amended its cash tender offer for Amstar's 11 3/8% senior subordinated notes to $750 per $1,000 principal amount, up from $550.
Essex also reduced the minimum amount of notes needed for the offer to $86.6 million from $100 million earlier. The company also extended its tender offer for Amstar's notes until midnight Dec. 30. This is its second extension.
Holders representing slightly more than $3 million of the $100 million of 11 3/8% notes had accepted by the first deadline, which expired at 5 p.m. eastern standard time last Friday, an Essex spokes-woman said. Yesterday's deadline was 5 p.m.
Amstar and Essex are wholly owned subsidiaries of Esstar Inc. Affiliates of Merrill Lynch Capital Partners control about 89% of Estar's voting power, an Essex release said.
"Merrill Lynch has taken a lot of money out of the deal at the expense of bondholders," one highyield source said.
The source said the noteholders' complaint stems from an investment banking fee Merrill Lynch & Co. took relating to a restructuring. While it can be argued that the two Merrill Lynch entities involved are separate, "that doesn't cut too much ice" with noteholders, the high-yield source said.
Another high-yield source said the problem wasn't actually a restructuring, but involved some money Amstar lent to Essex.
Word has it that Apollo Advisors has a major position in the bonds. An official at Apollo did not deny that.
In its first offer, Essex offered noteholders $550 for each $1000 principal amount of the bonds plus accrued interest from Aug. 15, 1991 to the date of acceptance for payment. Holders representing only $3.37 million principal amount of the notes tendered their securities, a company release said. That figure had not changed as of late yesterday.
Some high-yield traders surveyed before Essex increased its offer said the 13 7/8% bonds gained between three to five points yesterday and were trading at 70.
"When they trade past the tender price somebody usually knows something," a high-yield source said.
The high-yield market overall was quite and up about 1/8 point in secondary trading. High-grade bonds climbed an 1/8 to 1/4 point in line with Treasuries.
In yesterday's rating action, Standard & Poor's Corp. placed the AA claims-paying ability ratings of Phoenix Mutual Life Insurance Co. and its subsidiary Phoenix American Life Insurance Co. on CreditWatch for a possible downgrade. The agency also placed industrial revenue bonds guaranteed by Phoenix Mutual under review with negative implications.
Standard & Poor's affirmed Phoenix Mutual's A-1-plus commercial paper rating, which was not placed on CreditWatch. Concurrently, the agency placed the A-minus claims-paying ability and the A-2 commercial paper ratings of Home Life Insurance Co. on CreditWatch with positive implications.
Phoenix Mutual and Home Life were expected to sign a proposed merger agreement yesterday, which needs final approval from policyholders as well as New York and Connecticut insurance departments.
"S&P believes that such a merger, over the long term, could result in a company well-equipped to take advantage of competitive opportunities and operating efficiencies," the release said. If approved, the proposed merger becomes effective in summer 1992.
"S&P recognizes that "Phoenix/Home" could potentially benefit from expense savings, as well as synergies from combining lines of business. Expense savings, stemming in part from consolidation of administration and service functions, should favorably impact earnings and, over time, bolster the capital structure."
If the anticipated expense savings result from the proposed merger, and the asset portfolios at either company do not deteriorate further to any significant degree, Standard & Poor's expects the merged company to qualify for a AA-minus rating, the release said.
Also yesterday, Standard & Poor's placed Orange & Rockland Utilities Inc.'s AA-minus senior secured debt, A-plus senior unsecured debt and preferred stock, and A-1 plus commercial paper ratings on CreditWatch for a possible downgrade. The AA-minus rating on subsidiary Rockland Electric Co.'s first mortgage bonds was also placed under review. Approximately $394 million of debt is effected.
"The action reflects Orange & Rockland Utilities Inc.'s limited prospects for achievement of expected earnings and interest coverage levels, in view (of) a restrictive New York gas rate decision," a Standard & Poor's release said.
