A Deutsche Bank-led sale for an automotive and industrial battery maker raised eyebrows last week when it was restructured due to an apparent lack of investor demand even in a supply starved, yield-hungry environment. Exide Technologies also had buy-siders buzzing over its unusual decision to roadshow the sale before it had a new ceo---a move which high-yield investors say was an early, ominous sign. Late last week, Exide downsized its high-yield offering and carved out a convertible note sale to help it raise the $350 million it is seeking.
The company had initially proposed to raise $350 million in eight-year, senior unsecured paper but by late Thursday it had downsized the Caa1/single-B deal to $290 million and added a $60 million convertible note piece. The company intends to use proceeds from its offering to repay $250 million of term loan debt. David Flannery, head of high-yield capital markets at Deutsche Bank, did not return a call. Ted Meyer, spokesman for Deutsche Bank, said price talk on the high-yield issue ranges from 10 1/4% to 10 1/2% and it is expected to be priced this week. Meyer declined further comment, citing Rule 144a restrictions.
If the split-rated deal gets done at those levels, it will come at a significant discount to similarly rated offerings: the average single-B coupon is 8.7% and the average triple-C coupon is coming in at 9.4%, according to Merrill Lynch.
Investors said it is noteworthy the deal would face resistance given the broad demand for yield. One added he was particularly turned off to the credit because it began its roadshow for the deal without a ceo in place, even though it recently emerged from bankruptcy. Investors also expressed concern about Exide's creditworthiness going forward after its recent emergence from bankruptcy, with one referring to the deal as a "tough sell."
Exide earlier this month appointed Gordon Ulsh to succeed Craig Muhlhauser as ceo, effective at the beginning of April. Calls to Muhlhauser and Alan Chapple, spokesman, were not returned by press time.
