Rite Aid sells bonds; proceeds to redeem '06 notes

Rite Aid Corp. (B3/B-) was heard by high-yield syndicate sources on Wednesday (Feb. 5) to have sold $300 million of new 9½% senior secured notes due 2011 via bookrunner Salomon Smith Barney. The company is expected to redeem its senior secured (shareholder) notes due 2006 in connection with the offering.

AS PREVIOUSLY ANNOUNCED: Rite Aid, a Camp Hill, Pa.-based drugstore chain operator, said on Monday (Feb. 3) that it planned to sell $200 million of the notes, a sum which was subsequently increased.

The company said it planned to use the net proceeds from the Rule 144A note sale for general corporate purposes, which it said might include capital expenditures and repayments or repurchases of outstanding debt. In its 8-K filing with the Securities and Exchange Commission, Rite Aid added that it planned to redeem its 2006 notes in connection with the offering.

Cascades unit plans to redeem 8 3/8% '07 notes

Cascades Inc. (Ba1/BB) said Wednesday (Feb. 5) that its Cascades Boxboard Group Inc. subsidiary plans to redeem all US$125 million of its outstanding 8 3/8% senior notes due 2007. It expects that the redemption will be financed with a portion of the net proceeds of Cascades' recent sale of new 7¼% senior notes due 2013. It is expected to be completed sometime during the current quarter.

The planned note redemption will be undertaken as part of the company's previously announced refinancing program. Cascades said Wednesday that that it has completed the refinancing of substantially all of its and its subsidiaries' outstanding credit facilities and credit lines, other than credit facilities and credit lines of its joint ventures.

As part of that refinancing, Cascades completed the sale of US$450 million of the 7¼% notes in a private placement to institutional investors. That deal was heard by high-yield syndicate sources to have come to market on Jan. 31 via Salomon Smith Barney and Scotia Capital, the joint bookrunning managers, and NBC International (USA) Inc., CIBC World Markets, BNP Paribas, Comerica Securities, SG Cowen, BMO Nesbitt Burns and TD Securities, the co-managers.

Also as part of the refinancing, Cascades and certain of its subsidiaries entered into a new four-year C$500 million revolving credit facility with The Bank of Nova Scotia, as administrative agent, Scotia Capital, as lead arranger, National Bank of Canada, as syndication agent, and Canadian Imperial Bank of Commerce and Salomon Smith Barney, as co-documentation agents.

Cascades said the refinancing will simplify its debt structure and will extend its debt maturities, providing it with improved liquidity and financial flexibility.

AS PREVIOUSLY ANNOUNCED: Cascades, a Kingsey Falls, Quebec-based paper products manufacturer, said on Jan. 8 that it would exchange up to US$125 million of newly issued debt for the 8 3/8% notes, as part of a series of transactions it was undertaking to refinance substantially all of its and its subsidiaries outstanding credit facilities and credit lines, other than credit facilities and credit lines of its joint ventures.

Other transactions concurrently announced included the issuance of US$325 million of newly issued debt securities in a private placement (this amount was subsequently increased), and the entering into of a new C$500 million four-year revolving credit facility. Cascades said that it expected the private placement of the new notes to close concurrently with the new revolving credit facility, and the exchange offer to close shortly thereafter. The company said it expected to complete the refinancing during the first quarter of 2003.

It said the refinancing would be contingent upon a number of factors, including market conditions and Cacades' determination as to the appropriate time, if any, for the refinancing.

On Jan. 21, Cascades announced that it would extend the consent payment deadline for its exchange offer to 5 p.m. ET on Jan. 22, from the previous deadline of 5 p.m. ET on Jan. 21, which had not been previously publicly announced.

Cascades said the consummation of the exchange offer would remain subject to the satisfaction or waiver, on or prior to the expiration date for the exchange offer, of certain conditions to the offer, including receipt of the requisite consents needed to approve proposed amendments to the indenture governing the notes. It further noted that except for the extension of the consent payment deadline, the terms of the exchange offer would remain the same.

On Jan. 23, Cascades announced that it would terminate the previously announced offer to exchange newly issued Cascades debt securities for the outstanding 8 3/8% notes. Cascades offered no explanation for the termination decision.

Veritas DGC to redeem 9¾% '03 notes

Veritas DGC Inc. (Ba3) said on Wednesday (Feb. 5) that it plans to redeem all of its currently outstanding 9¾% senior notes that are scheduled to mature in October.

Veritas DGC, a Houston-based provider of integrated geophysical services and technologies to the petroleum industry, said in an 8-K filing with the Securities and Exchange Commission that, in anticipation of closing a major refinancing, it had notified the trustee for the notes, U.S. Bank NA, of its intent to redeem the securities.

Veritas said it will redeem $75 million of 9¾% notes issued in October, 1996, and will also redeem a total of $60 million series B and Series C 9¾% notes that were issued in October 1998.

Veritas said that the expected redemption date for the notes is March 14. However, the company cautioned that - as provided for in the notes' indentures - its notice to the trustee is revocable until written notice of redemption is given to the holders of the notes. It further cautioned that the trustee has been instructed not to give the notice of redemption to the holders of the notes until Veritas specifically confirms that the notice should be sent.

Veritas warned that it can give no assurance that the anticipated refinancing will occur, or that the notes will be redeemed prior to their maturity in October 2003.

Crown Cork & Seal tenders for four series of notes

Crown Cork & Seal Co. Inc. (B1/CCC+) said on Tuesday (Feb. 4) that it had begun concurrent tender offers for four series of notes issued by the company and two financing subsidiaries. The company is offering to purchase any and all of the outstanding notes of those series, as part of its recently announced comprehensive refinancing plan.

Crown Cork is tendering for its $194.5 million of outstanding 6¾% notes which are scheduled to mature on April 15, and $192.25 million of outstanding 8 3/8% notes due 2005. It is also tendering for the $193.5 million of 6¾% notes issued by its Crown Cork & Seal Finance plc unit and the $184.25 million of outstanding 6¾% notes issued by its Crown Cork & Seal Finance SA subsidiary. The latter two series of notes are both scheduled to mature on Dec. 15.

Crown Cork will repurchase the 6¾% notes due April 15 at a cash price of 100.5% of their principal amount (i.e. $1,005 per $1,000 principal amount), and will repurchase the other three series at in cash at par. It will also pay all tendering holders accrued and unpaid interest up to, but not including, the settlement date.

The tender offers are being made independently of one another, and all are currently scheduled to expire at 12:01 a.m. ET on March 5, subject to possible extension. Completion of the applicable tender offer is subject to the satisfaction or waiver of various conditions, including the condition that Crown Cork's refinancing plan is consummated on terms satisfactory to the company.

Salomon Smith Barney Inc. (call toll-free at 800 558-3745 or collect at 212 723-6106) is acting as dealer manager for the tender offers. The information agent and depositary is Mellon Investor Services LLC (call 800-903-7594).

AS PREVIOUSLY ANNOUNCED: Crown Cork & Seal, a Philadelphia-based maker of beverage cans and other packaging for consumer products, said on Jan. 29 that it would embark on a comprehensive refinancing plan valued at more than $3 billion, which would consist of $1.05 billion of first lien bank debt, the issuance of $1.75 billion in senior secured second and third lien notes, and the receipt of gross proceeds from the issuance of convertible notes and debt-for-equity exchanges totaling $325 million. The plan would result in substantially all of the company's debt having stated maturities in 2006 and beyond.

The plan envisions the refinancing of approximately $900 million of Crown Cork's senior notes, including all of the notes scheduled to mature in 2003 and approximately $300 million of the notes due in 2004 and 2005. A portion of the proceeds from the refinancing will also be used to refinance the company's existing revolving credit facility, which is scheduled to mature in December, as well as to pay fees and expenses associated with the refinancing.

Crown Cork currently expects the refinancing to be completed by the end of the first quarter.

SoCalEd reaches minimum tender threshold in 8.95% '03 notes debt swap

Southern California Edison Co. (Ba2) said Tuesday (Feb. 4) that it has been informed by the exchange agent for its previously announced offer to exchange a new series of first mortgage bonds for its existing 8.95% variable rate notes that, as of 5 p.m. ET that afternoon, approximately $956 million in aggregate principal amount of the existing notes - or more than 95% of the outstanding amount - had been tendered in the exchange offer.

The company said that the previously announced minimum requirement of valid and unwithdrawn tenders representing at least 25% of the existing notes has been met, allowing the offer to proceed. Completion of the exchange offer remains subject to the absence of certain adverse legal and market developments prior to the offer's expiration date.

AS PREVIOUSLY ANNOUNCED: Southern California Edison, a Rosemead, Calif.-based regulated utility unit of Edison International that supplies electric power to central, coastal and southern California, said on Jan. 14 that it had begun an offer to exchange the new first mortgage bonds for up to $1 billion of its existing 8.95% notes, which are scheduled to mature this coming November.

SCE said that the exchange offer would expire at 5 p.m. ET on Feb. 19. The company is offering $1,000 principal amount of its new 8% Series 2003A first and refunding mortgage bonds due 2007 per $1,000 principal amount of the existing notes.

It added that holders tendering their 8.95% notes prior to the now-expired early tender deadline of 5 p.m. ET on Tuesday (Feb. 4), and not subsequently withdrawing them would be entitled to an additional early participation payment of $10 cash per $1,000 principal amount of 8.95% notes tendered, assuming completion of the exchange offer.

The company said that tenders of the existing notes could be withdrawn at any time prior to the LATER of either A) 5 p.m. ET on Feb. 4, OR B) the time SCE would announce receipt of valid and unwithdrawn tenders representing at least 25% of the outstanding principal amount of the notes, but in no event later than the expiration date.

SCE said completion of the exchange offer would be subject to a number of requirements, including the now-fulfilled condition of receipt by the company of tenders representing at least 25% of the outstanding principal amount of the existing notes, as well as the absence of certain adverse legal and market developments.

It said that the offer to exchange the new bonds for the existing notes was being made only to holders of the existing notes who have verified to the company that they can be considered to be "qualified institutional buyers" or, persons other than a "U.S. person" located outside the United States, as such terms are defined in Rule 144A and Regulation S of the Securities Act of 1933, as amended. SCE said it plans to enter into a registration rights agreement under which it will agree to file an exchange offer registration statement with the Securities and Exchange Commission to allow eligible holders to exchange the new bonds for the same principal amount of a new series of substantially identical bonds that will be registered under the Securities Act.

SCE said the new bonds would be secured equally and ratably with all other first mortgage bonds outstanding now or in the future under its existing first mortgage bond indenture by a lien on substantially all of the company's properties and franchises.

Additionally, SoCal Edison reserved the right to redeem the new bonds at any time, in whole or in part, at a "make whole" redemption price equal to the greater of either the principal amount being redeemed OR the sum of the present values of the remaining scheduled payments of principal and interest on the new bonds being redeemed, discounted to the date fixed for redemption on a semi-annual basis at a 50-basis point fixed spread over a specified treasury yield. In either case, the company will also pay to the redeeming holders accrued and unpaid interest up to the date of redemption.

Level 3 cut $500 million debt recently, including Q4 debt-for-equity swaps

Level 3 Communications Inc. (Caa3/CC) said in its fourth-quarter earnings announcement on Tuesday (Feb. 4) that since the beginning of that quarter it has reduced the face amount of its consolidated debt by approximately $500 million, including $139 million through the CPTC transaction completed in January 2003.

The balance of the debt reduction occurred during the fourth quarter itself and consisted of $295 million face amount of debt-for-equity exchanges, under which the company issued 24 million new shares of common stock, and a reduction in mortgage debt by $59 million through the sale of excess real estate.

Level 3 said that over the past 18 months, it has reduced the face amount of its debt by approximately $2.9 billion through a combination of cash repurchases, debt-for-equity exchanges and asset sales.

The company said it will continue to evaluate debt reduction opportunities over time.

AS PREVIOUSLY ANNOUNCED: Level 3, a Broomfield, Colo.-based long-haul telecommunications operator, bought back $1.7 billion face value of debt for $731 million in October 2001 under a "modified Dutch auction" procedure. In a filing with the SEC on March 19, 2002, it said that it had retired a further $195 million face amount of its debt securities by exchanging them for common stock and cash. The company gave no specific details as which bonds were retired, or on what terms, other than to say it issued 7.4 million shares of its common stock, valued at $32 million, and used $34 million of cash in the latest retirement transactions, and said that it would recognize a first-quarter gain of $130 million after transaction and debt issuance costs.

Noting that its debt and convertible securities were trading at sizable discounts to their par value, Level 3 said in its filing that it might continue to purchase its outstanding securities for cash or stock in open market or privately negotiated transactions.

On Oct. 30, Level 3 said in its earnings announcement that it had retired approximately $75 million face amount of debt during the third quarter through cashless debt-for-equity exchanges. The company said it would continue to evaluate debt reduction opportunities.

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