AK Steel solicits noteholder consents

AK Steel Corp. (B1/BB) said on Friday (July 26) that it has begun soliciting the consents of the holders of record (as of July 31) of its 7 7/8% senior notes due 2009, its 8 7/8% senior notes due 2008 and its 9% senior notes due 2007 to proposed amendments to the indentures governing those notes. The proposed amendments would bring certain provisions of the notes' indentures into line with the indenture for AK Steel's recently issued 7¾% senior notes due 2012. Concurrently, AK Steel is seeking to amend its senior secured notes due 2004 to modify certain provisions of the agreement governing those notes. The consent solicitations will expire on Aug. 7, subject to possible extension. AK Steel is offering to pay a $2.50 cash consent fee for each $1,000 principal amount of notes for which a consent is validly delivered and not revoked. Payments for the consents will be conditioned upon receiving consents from the holders of a majority of the outstanding notes. Credit Suisse First Boston (call 800 820-1653 or 212 538-8474) is the lead solicitation agent for the consent solicitations. Georgeson Shareholder (call 800 530-3596 or 212 440-9800) is the information agent.

AS PREVIOUSLY ANNOUNCED, AK Steel, a Middletown, Ohio-based producer of carbon, stainless and electrical flat-rolled steel, said on June 3 that it planned to sell $550 million of new 10-year notes in the Rule 144A market, and would use the expected proceeds of the offering to re-finance its 9 1/8% senior notes due 2006. AK did not at that time give a timetable for the expected refinancing of the existing notes. High yield syndicate sources heard that the company would begin a short roadshow for the new offering on June 4, with pricing likely for June 6 via book-running manager Credit Suisse First Boston and co-manager Goldman Sachs. On June 6, the syndicate sources reported that AKS had sold $550 million of new 7¾% senior notes due 2012. On June 11, the company said that it would redeem all $550 million of its outstanding 9 1/8% notes on July 11, financing the redemption with the proceeds from its recently completed sale of new 7¾% notes. AK Steel said the 9 1/8% notes would be redeemed at a price of 104.56% of their par value (i.e., $1,045.60 per $1,000 principal amount). On July 12, AK Steel said that it had, in fact, redeemed all of its outstanding 9 1/8% notes as scheduled on July 11, funding the redemption with the proceeds of its recent sale of new 10-year-notes.

Tyco to repurchase $2 bln of debt beyond maturing issues

Tyco International Ltd. (Ba1/BBB-) said on Thursday (July 25) that it plans to repurchase $2 billion of its public debt during the current fiscal fourth quarter, although it declined to elaborate as to which issues of its debt would be bought back, and under what circumstances. In a late-afternoon conference call with investors and analysts, Tyco's chief financial officer, Mark Swartz, said that Tyco would have some $8 billion of cash on hand before any debt repayment, including cash previously on hand and the $4.4 billion of proceeds from the Pembroke, Bermuda-based conglomerate's recent sale of its CIT financial unit. Swartz said that Tyco would be repaying $1.25 billion of debt scheduled to come due during the quarter; additionally, he said, Tyco would be able to repurchase about $2 billion of its public debt at an overall discount of $200 million. He said that Tyco would buy back maturing debt "in the extent available in the marketplace," and while he pointedly noted that Tyco had not specifically indicated what debt it would be buying in, other than to say that the company would not be buying back any debt "beyond next November." Swartz said that assuming the debt purchase would take place as outlined, Tyco would finish the quarter with net debt of $18 billion. He cautioned investors and others against trying to "second-guess" the company or read into the announcement of the planned debt repurchase any kind of inference as to which debt was going to be repurchased, but said that Tyco "will be in a position at the end of the quarter to talk specifically about what we have repurchased."

Swartz further said that Tyco has bank debt and convertible debt coming due in February 2003 and said that "as an insurance plan, if the requirements were necessary," the company has "other contingency plans beyond refinancing and asset disposition" which involve being able to settle the convertibles in February with $2.3 billion in stock. The CFO said that "at this point, it's not one that we would plan on doing or want to do," but he said that a registration statement filed with the Securities and Exchange Commission covers enough shares to satisfy that put. He projected that by the end of the February quarter Tyco would have net debt of $15 billion, and a net debt to net capitalization of 32%, which Swartz called "extremely strong" for a company like Tyco. Regarding any other debt scheduled to mature in or before November, 2003 which Tyco would not have otherwise previously repurchased or redeemed, Swartz said that "given our asset base and financial profile, we believe there are many solutions available to us in order to refinance that debt effectively, and we'll be in a position to do it long before November of '03."

Graham Packaging terminates tender offer for 10¾% '09 notes

Graham Packaging Holdings Co. said on Tuesday (July 23) that its Graham Packaging Co. Inc.(Caa1/CCC+) subsidiary and the latter's GPC Capital Corp. II affiliate, had terminated their previously announced tender offer for Graham Packaging's outstanding 10¾% senior discount notes due 2009 and the related solicitation of noteholder consents to proposed indenture changes. Graham Packaging simultaneously announced that GPC Capital Corp. II had postponed plans for a previously announced initial public offering of its common stock due to the recent adverse conditions in the stock market, and it said that Graham Packaging Co., its GPC Capital Corp. I subsidiary and GPC Cpital Corp. II had likewise postponed their proposed $100 million offering of senior subordinated notes. The tender offer had been conditioned, among other things upon the completion of the IPO, proceeds of which were to have been used to fund the tender offer, and upon completion of the debt placement.

AS PREVIOUSLY ANNOUNCED, Graham Packaging, a York, Pa.-based plastic container company, was heard by high yield syndicate sources on May 28 to be planning to sell $100 million of six-year senior subordinated notes, with the deal proceeds slated to be used for the repurchase of the company's outstanding $169 million ($155.7 million accreted value) of senior discount notes, and to repay bank debt. Market sources said that Deutsche Bank Securities Inc. would be the book-running manager on the upcoming offering. They said the bond deal would be part of a recapitalization plan that would also include a new $700 million senior credit facility (comprised of a $550 million term loan and a $150 million revolver), and an initial public offering of up to $287.5 million of common shares. On May 30, Graham Packaging Co. said that itself, along with GPC Capital Corp. I, and with GPC Capital Corp. II, had filed a registration statement with the Securities and Exchange Commission for an offering of senior subordinated notes in a proposed aggregate maximum offering amount of $100 million. It said the notes would be co-issued by Graham Packaging Co. and GPC Capital Corp. I, and would be guaranteed by GPC Capital Corp. II, which it said intended to undergo a reorganization in which it would change its name to Graham Packaging Company Inc., become the parent company of the issuers and effect its IPO of common stock. GPC Capital Corp. II filed a registration statement with respect to its initial public offering on May 24. The company said the offering is part of a refinancing plan designed to reduce the amount and extend the maturities of Graham Packaging's long-term debt, reduce interest expense and improve financial flexibility. Graham Packaging said it expects to use net proceeds from the bond offering plus proceeds from new indebtedness and any remaining proceeds from Graham Packaging Company Inc.'s initial public offering of common stock after its repurchase of certain indebtedness, to refinance certain of its existing indebtedness. Deutsche Bank Securities Inc. and Salomon Smith Barney Inc. were named as the joint book-running managers for the bond offering. On July 3, GPC Capital Corp. II said that it was beginning a cash tender offer (which ultimately was terminated) for Graham Packaging Holdings' outstanding 10¾% senior discount notes and a related solicitation of consents from registered noteholders to proposed indenture changes. Graham said the tender offer would expire at 5 p.m. ET on July 31, subject to possible extension. Graham said that the total consideration for the notes would be based on a 75-basis point fixed spread over the yield to the earliest redemption date on the applicable U.S. Treasury Note, and would include a consent payment of $20 per $1,000 principal amount at maturity of notes tendered by the consent deadline of 5 p.m. ET on July 17, subject to possible extension, which would automatically render the holder's consent to the proposed indenture changes.

Graham said the proposed indenture amendments were aimed at (a) eliminating most of the notes' restrictive covenants including, without limitation, the covenants limiting the incurrence of debt, restricted payments, transactions with affiliates, asset sales and dividend and other payment restrictions affecting subsidiaries, (b) eliminating limitations on mergers, consolidations, (c) eliminating certain events of default and (d) modifying certain repurchase and defeasance provisions. Graham said the tender offer was undertaken in connection with Graham Packaging's previously announced internal reorganization effort. Graham said it planned to fund the tender offer using the expected net proceeds from its previously announced planned initial public offering. It said the offer would be conditioned upon the receipt of the consents necessary to adopt the proposed amendments. The amendments would only become operative if a majority of the outstanding aggregate principal amount of notes were tendered. The offer would also be conditioned upon, among other things, the completion of the initial public offering, as well as a previously announced senior subordinated notes offering and a previously announced bank refinancing. Graham said the proposed amendments would be effective for all notes not purchased under the tender offer upon consummation of the offer, provided all other conditions to the Offer have otherwise been satisfied. It said that were the proposed amendments to become operative, the adoption of those proposed amendments would require the consent of holders of at least a majority of the outstanding notes. After the internal reorganization, Graham would remain as the sole issuer of the notes. Deutsche Bank Securities Inc. (call 800 553-2826) and Salomon Smith Barney Inc. (call 800 558-3745) were the dealer managers for the tender offer and consent solicitation. The information agent was MacKenzie Partners, Inc. (call 212 929-5500 or 800 322-2885). The depositary was The Bank of New York.

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