INVISTA, a U.S. textile fiber manufacturer, pulled the euro-denominated tranche of its high-yield offering late last month because of settlement complications. The shelving happened the day the deal was set to be priced by lead underwriter J.P. Morgan Securities and after many European investors had already been lined up.
Euroclear informed J.P. Morgan in London at the outset that it would not be able to accept the deal as it was structured, according to Conor Leeson, spokesman for the Brussels-based clearing giant. The problem from Euroclear's perspective was that the unit structure of the deal involved one taxable and three non-taxable entities, with a single coupon. Euroclear would not be able to fulfill its reporting responsibilities to the Internal Revenue Service because it would have been unable to track the income derived from the lone taxable entity, said Leeson.
Eric Capp, managing director in J.P. Morgan's high-yield syndicate and capital markets group in London, said Euroclear had at first stated it could handle the transaction but in the end could not; he could not be reached to respond to Euroclear's rationale. Marybeth Jarvis, spokeswoman for Koch Industries, INVISTA's parent, did not return calls by press time.
The euro class was shelved and the entire deal was ultimately priced entirely in dollars, and was upsized from $575 million to $675 million to accommodate investors who had indicated interest in the euro-tranche. The Depository Trust Clearing Company will clear the entire deal. The director of underwriting at DTCC could not be reached for comment by press time.