Holders of Safety-Kleen debt are starting to close on trades--some as old as two-and-a-half years--in order to receive rights to buy shares of stock in Safety-Kleen as part of its planned rights offering. A trader said the company, which announced a rights offering in May, is now closing on the offering and debt holders are now completing trades. The company is doing the rights offering to reduce debt. A spokesman said the company is not seeking to eliminate all of its debt and said the size of the rights offering has not yet been determined.
Safety-Kleen has a large backlog of unclosed trades because certain sellers of the debt have refused to transfer litigation proceeds to buyers of the debt. The litigation proceeds relate to a lawsuit between Safety-Kleen's former auditor PricewaterhouseCoopers and banks, led by Toronto Dominion, which funded a loan to finance the takeover of Safety-Kleen by Laidlaw Environmental Services in 1998. The Loan Syndications and Trading Association issued a legal advisory in April urging holders of the debt to settle trades in accordance with loan practices (CIN, 4/24).
Safety-Kleen noted in a release that many trades of its common stock and senior subordinated term notes, known as take-back notes, which trade with the common stock as a unit, have not closed. If owners do not settle trades before a record date, which has not been determined, they will not receive rights from Safety-Kleen and would need to contact their trading counter-parties to obtain the rights.
A dealer said trades are in the process of closing to be in time for the rights offering. He added that a particularly large trade, worth $100 million, has recently settled. The bank debt, known as Safety-Kleen Old Way, traded up a point to the 39-40 context.
