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Equipment Provider Slides Down

16 Mar 2003

National Equipment Services' bank debt was active two weeks ago with a $20 million piece changing hands in the 64 context and another $14-15 million block moving in the low 60s. A few million was believed to have changed hands previously in the 67 1/2 context. The identities of the parties involved in the trades could not determined. The bank debt was said to be resting quietly in the low 60s last week with no trading. The seller is probably done with his spree, commented one dealer.

National Equipment's debt has been sliding as investors fear the company might be close to covenant violation and will miss a May 31 coupon payment. Covenants in the credit agreement include a maximum senior debt-to-EBITDA requirement, a minimum interest coverage ratio and a funded debt-to-EBITDA multiple. The company violated its leverage coverage covenants last year, but received a subsequent amendment that reduced availability on its revolver from $550 million to $480 million. The company also has a $70 million term loan, according to its Nov. 14 10-Q.

Some investors fear that the industrial and construction equipment rental services company will follow in the footsteps of its competitor, NationsRent, which has been in bankruptcy since December 2001. The market for NationsRent's bank debt is in the 18 7/8 ­ 20 1/2 range, according to LoanX. But NationsRent has a whole set of different, more problematic balance sheet issues, one buysider noted. Questions to Michael Milligan, National Equipment's cfo, were referred to the company's controller, who did not return calls by press time.

16 Mar 2003