Bondholders owning $900 million of debt in United Rentals are demanding higher consent fees from the company for the delay in the filing of its financial statements with the Securities and Exchange Commission. "The bondholders feel the financial terms are inadequate," said Andrew Rahl, partner at law firm Anderson Kill & Olick.
The equipment rental company's bonds and its revolver stayed flat in the 94-98 range and 98.125, respectively. Its term loan "B" was trading 100.925, down slightly from 101.075 on Aug. 23.
United Rentals announced in March it would delay reporting its 2004 results and the filing of its 10-K to review matters brought up by the SEC, which is investigating the company. By delaying the filing, the company has breached indentures governing its bonds that require the timely filing of reports.
United Rentals is asking bondholders to allow it until March 31 to file its financial reports with the SEC. It is offering bondholders a consent fee of $2.50 for each $1,000 in principal amount of notes and 12.5 cents for each $50 of liquidation preference of convertible quarterly income preferred securities (QUIPS). If the company fails to file its 2004 10-K by December 31, 2005, the company is offering to pay an additional $2.50 for each $1000 in principal amount of notes and 12.5 cents for each $50 of liquidation preference of QUIPS.
Rahl said the bondholders want higher consent fees, but would not elaborate on how much they are demanding. The bondholders are also demanding that the company reports monthly unaudited financial statements to help the price of United Rentals' bonds. He said United Rentals had not responded to the bondholders' demands. "We have not heard from them yet. It is surprising because normally you do hear from the company in a situation like this," Rahl said. Alfred Colangelo, v.p. of finance at United Rentals, declined to comment.
United Rentals' bank lenders, which own $200 million of debt in the company, are likely to remain unaffected by the negotiations, said Rahl. "The company would have to lose more than 90% of value for the bank lenders to lose any money," he said.
United Rentals is seeking consents from holders of its 6 1/2% senior notes due 2012, its 7 3/4% senior subordinated notes due 2013, its 7% senior subordinated notes due 2014, its 1 7/8% convertible senior subordinated notes due 2023, and its 6 1/2% convertible quarterly income preferred securities.