Silgan Corp. and its holding company will use proceeds from two high-yield offerings yesterday to refinance higher-cost debt, some of which shoulders a 17-1/2% coupon, according to a high-yield analyst.
"Seventeen-and-a-half percent is rather onerous," the analyst said yesterday. Silgan yesterday issued $135 million of 11.75% senior subordinated notes, while Silgan Holdings Inc. issued $275 million principal amount of 13.25% senior discount debentures.
Both issues mature in 2002. Actual proceeds from the discount debentures are $165 million, sources familiar with the offering said. Silgan Corp. also placed $50 million of floating rate debt privately, they said.
Proceeds will be used to redeem Silgan Corp.'s $85 million of 14% notes due 1997 and $177 million of 17-1/2% reset debentures due 1996. The funds will also be used to redeem some 15% preferred stock and to pay down bank debt.
In addition to the overall interest savings, the zero coupon structure allows Silgan Holdings to extend its cash interest payment schedule, the analyst said. The first cash interest payment on the resets was due in 1994, while the first interest payment on the new senior discount debentures begins in 1996.
"So they buy another two years," the analyst said.
Silgan Corp.'s $135 million of 11.75% note were priced at par. They are callable after five years at 105.875. Silgan Holdings Inc.'s $274.287 million principal of senior discount debentures were priced at 60.156 to yield 13.25%. The first interest payment occurs Dec. 15, 1996. The bonds are callable after five years at par plus accrued interest.
Also yesterday, Kroger Co. filed a shelf registration with the Securities and Exchange Commission for $500 million of debt, Larry Turner, a spokeman for the company, confirmed.
Combined with $125 million remaining from a $750 million shelf filed last February, the filing brings Kroger's shelf debt total to $625 million, Mr. Turner said. No underwriters have been named, he said.
"We don't have any deal sitting there waiting to hatch," Mr. Turner said, adding that Kroger filed the shelf to be ready if a financing opportunity arises.
In other news, CIT Group Holdings Inc. filed a shelf registration with the SEC for up to $1 billion of medium-term notes, according to James Shanahan, a CIT attorney.
Together with $20 million registered earlier, the filing brings to $1.02 billion the total amount of medium-term notes on the shelf, Mr. Shanahan said. Agents are Merrill Lynch & Co.; Salomon Brothers Inc.; Lehman Brothers; UBS Securities Inc.; Goldman, Sachs & Co.; and First Boston Corp. CIT will use proceeds to provide working capital and reduce short-term debt, primarily commercial paper, he said.
Dai-Ichi Kangyo Bank owns 60% of CIT, with Chemical Banking Corp. owning the remaining 40%, Mr. Shanahan said.
In secondary trading yesterday, high-grade spreads widened a touch in slow activity, while high-yield bond prices fell 1/4 to 1/2 point.
New Issues
Fleet Financial Group Inc. issued $250 million of 8.125% subordinated notes due 2004. The noncallable notes were priced at 99.133 to yield 8.24% or 99 basis points over 10-year Treasuries. Moody's Investors Service rates the offering Baa3, while Standard & Poor's Corp. rates it BBB. Salomon Brothers lead managed the offering.
Illinois Power issued a two-part first mortgage bond offering totaling $197 million. The first tranche consisted of $72 million of 7.95% bonds due 2004. The noncallable notes were priced at 99.724 to yield 7.986% or 73 basis points over 10-year Treasuries.
The second tranche consisted of 8.75% bonds due 2021. Noncallable for five years, the bonds were priced at 99.905 to yield 8.759% or 90 basis points over comparable Treasuries. Moody's rates the offering Baa2, while Standard & Poor's rates it BBB-plus. Merrill Lynch & Co. managed the offering.
Dow Chemical issued a two-part offering totaling $172 million of pass through certificates. The first tranche consisted of $54 million of 7.60% certificates with a seven-year average life. They were priced at par to yield 75 basis points over comparable Treasuries. The second tranche consisted of $118 million of 8.04% certificates with an 11.3-year average life. The certificates were priced at par to yield 80 basis points over comparable Treasuries. Moody's rates the offering A1, while Standard & Poor's rates it A.
Keycorp issued $125 million of 8% subordinated notes due 2004. The noncallable notes were priced at 99.24 to yield 8.10% or 85 basis points over 10-year Treasuries. Moody's rates the offering A3, while Standard & Poor's rates it BBB-plus. Merrill Lynch lead managed the offering.
Louisiana Land & Exploration issued $100 million of 8.25% notes due 2002 at par. The noncallable notes were priced to yield 100 basis points over comparable Treasuries. Moody's rates the offering Baa2, while Standard & Poor's rates it BBB-plus. Morgan Stanley lead managed the offering.
UTD Illuminating issued $100 million of 7.375% notes due 1998. The noncallable notes were priced at 99.511 to yield 7.483% or 100 basis points over when-issued five-year Treasuries. Moody's rates the offering Baa3, while Standard & Poor's rates it BBB-minus. Morgan Stanley lead managed the offering.
Waban Inc. issued $100 million of 6.5% convertible subordinated debentures due 2002. Noncallable for three years, the debentures were rated Ba3 by Moody's and BB-minus by Standard & Poor's. Wertheim Schroder & Co. managed the offering.
Yesterday's Ratings
MEDIQ/PRN Life Support Services Inc.'s $100 million senior secured notes due 1999 have received a B-plus rating from Standard & Poor's. The rating outlook is stable. Standard & Poor's also affirmed the B-minus rating on $52 million of subordinated debt of its parent, MEDIQ Inc. The agency also revised the rating outlook to stable from negative.
"The viability of MEDIQ/PRN remains linked to the ownership and creditworthiness of MEDIQ. The rating is therefore limited by MEDIQ's implied senior secured rating, which is single-B-plus," the agency's release says. "However, this new debt's priority claim on PRN's rental equipment is recognized in its higher assessment vis-a-vis that of the parent's subordinated obligations."
Standard & Poor's has upgraded Transco Energy Co.'s preferred stock to B-minus from CCC and subsidiary Transcontinental Gas Pipe Line Corp.'s preferred stock to B-plus from B-minus, a Standard & Poor's release says.
The agency affirmed Transco's B senior debt rating, as well as Transcontinental's and Texas Gas Transmission Corp.'s BB-minus senior debt ratings. Concurrently, Standard & Poor's assigned a B-minus rating to Texas Gas's $100 million of notes due 1997. It also changed the rating outlooks for all three entities to positive from developing. Approximately $2.1 billion of debt remains outstanding, Standard & Poor's release says.
