13.04.2004

Ashtead close to completing £130 million bond issue

The Ashtead group, owners of A-plant in the UK, and Sunbelt in the US, has reported that it expects to 'close out' its previously announced £130 million ($235.85 million), ten-year, high-yield bond offering this week.

The bonds, underwritten and managed by Citigroup and Bank of America securities, will be issued by Ashtead Holdings PLC and are expected to be listed on the London Market.

£110.4 million ($200.29 million) of the proceeds will be used to pay down the company’s high debt level, reducing the outstanding senior level debt to around £310 million ($562.40 million). The bond issue was necessary to persuade the company’s lenders to agree to extend the maturity on the balance of the loan until September 2007. The balance for the funds raised will be retained by the company as additional working capital. The bonds will yield an interest rate of 12 percent.

As part of this rescheduling, caused by the company’s default, Rentokil has also agreed to change the detailed terms of its convertible loan note in order to allow the bond issue to go ahead. The unsecured Rentokil loan note is due to mature in 2008.

Ashtead's revenues for the nine months to January 31, 2004, were down over eight percent on the same period in 2003, which reflected a drop of almost 14 percent A-plant's revenues to £118 million ($214.08 million), and a six percent drop in sterling terms by Sunbelt to £255 million ($462.62 million).

In dollar terms, Sunbelt's revenues actually increased by almost six percent to $430 million (£237.02 million), but the dollar's weakness translated to fewer pounds.

Utilisation on both sides of the Atlantic are now up and rising according to the company - Sunbelt rising marginally to over 65 percent and A-plant's utilisation rising from 58 to 65 percent. The UK result was also affected by ongoing closures and disposals, icluding the elimination of 59 profit centres. The loss before tax for the period was almost £21 million ($38.10 million).

In addition to the challenges above, the company has admitted that it has not yet implemented all of the 66 improvements to its internal controls recommended by its auditors, following last year's accounting scandal. The company maintains that most of the improvements labeled as high or medium priority have now been put in place.

Price Waterhouse Coopers, the company’s auditors, which made the recommendations resigned last month, refused to confirm its past audits, making the bond issue more difficult and causing the company to add a warning note to the bond documents.