By Paul A. Harris
St. Louis, Mo., March 5 - Tembec Industries Inc. upsized its drive-by offering of 10-year senior notes to $350 million from $275 million Tuesday and priced the deal at par to yield 7¾%, according to a syndicate source. Goldman, Sachs & Co. was bookrunner.
When asked what attracted the company to the current high yield market, Tembec vice president of finance and chief financial officer Michael J. Dumas told Prospect News: "Seven-and-three-quarters says it all."
Tembec's Rule 144A bullets, Dumas said, will be used to refinance the company's 9 7/8% senior notes due 2005 and its Canadian tranche 8.30% senior notes due 2003.
"By taking those out I now have no maturities before 2009," the Tembec CFO commented.
Dumas said the specter of rising interest rates weighed upon the company's decision to bring the notes now.
"That was not the principal driver, however," he specified. "Maybe we're tainted by the business we're in. Forest products right now is very slow. We think it will take a few quarters for it to come back. In the interim we don't see rates skyrocketing.
"We looked at the absolute coupon and thought it was a good opportunity," he stated. "We've been monitoring it for sometime. This issue has been callable for some time. And we're just trying to see if we can get the optimum timing. And at 7¾% we're very satisfied."
Dumas characterized Tembec as a diversified forest products company.
"One-third of our business is lumber & engineered wood, which is fairly widely distributed in North America to wholesalers," he said.
"That's a fairly fragmented business. You've got the Home Depots, the Lowe's and the big guys, but you still have a lot of people selling lumber.
"We're in the pulp-to-pulp business and that is a much more global business," Dumas added. "We sell into Europe, Asia and North America. And the customers there are basically your major paper makers and specialty cellulose users.
"Finally we're in the paper business. We sell to Gannett and the New York Times."
Dumas also said that the book for Tembec's new notes was two-to-three times oversubscribed.
Co-managers on the Tembec deal were National Bank Financial, CIBC World Markets, TD Securities, Scotia Capital, BMO Nesbitt Burns and RBC.
Price talk had been 7¾%-8%
| Issuer: | Tembec Industries Inc.
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| Amount: | $350 million (increased from $275 million)
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| Maturity: | March 15, 2012
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| Type: | Senior notes
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| Bookrunner: | Goldman Sachs
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| Coupon: | 7¾%
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| Price: | Par
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| Yield: | 7¾%
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| Spread: | 274 basis points over 4 7/8% Treasury due Feb. 15, 2012
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| Call features: | Non-callable for life with T+50 make-whole call
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| Payment dates: | March 15 and Sept. 15 commencing Sept. 15, 2002
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| Settlement date: | March 13, 2002 (T+6) flat
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| Ratings: | Moody's: Ba1
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| Standard & Poor's: BB+
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