Owens May Find HLT Tag Hard to Shed
Despite an ambitious recapitalization plan announced late Tuesday, Owens-Illinois Inc. will remain highly leveraged and its bank loans probably will remain classified as HLTs.
Proceeds from a planned initial public stock offering and a $1 billion senior note offering will be used to repay expensive junk bond debt.
The company plans to sell 60 million shares at an expected price of $13 to $16 a share, raising as much as $960 million.
The company currently has about $505 million of bank debt outstanding, though that amount is expected to be reduced soon to $329 million.
Even if the recapitalization had taken effect as of Sept. 30, Owens-Illinois' leverage ratio still would have been 91%. Borrowers usually are tagged as HLTs if their liabilities exceed 75% of total assets.
Criteria for Delisting
However, one banker said Wednesday that the company might be able to shed the HLT designation by meeting other criteria.
Even if a borrower's leverage ratio exceeds 75%, it can be delisted if it has consistently met its financial projections, and if it is not significantly more leveraged than its competition.
It is up to the agent bank -- Bankers Trust Co. in this case -- to decide whether or not to delist the credit.
As of Wednesday afternoon, Bankers Trust apparently had not made any such determination, according to banking sources.
Bankers Trust, meanwhile, had no immediate comment.
As Against Competition
Carol Fuller, an analyst at Moody's Investors Service, said Owens-Illinois is no more highly leveraged than its competitors in the glass container business.
But when compared with the container industry as a whole, the company is "significantly more leveraged" than its competitors, she added.
Asked which was the more appropriate comparison, Ms. Fuller responded: "You really have to look at the whole industry."
Owens-Illinois, a Toledo, Ohio-based maker of glass and plastic containers, was taken private in a 1987 leveraged buyout by Kohlberg Kravis Roberts & Co.