Ahern Pulls Junk Bond After Investors Demand 10.5% Yield
(Bloomberg) -- Ahern Rentals Inc., a construction equipment rental company, has shelved its sale of $550 million of U.S. junk bonds after investors demanded more interest and protections than it was willing to offer, according to people with knowledge of the matter.
The company, which cited market conditions for withdrawing the bond sale, chose to walk away after potential buyers sought more safeguards in the deal’s structure and then a roughly 10.5% yield, the people said, asking not to be identified discussing a private transaction.
The bond terms and interest that asset managers demanded reflected the risk of lending to a company whose owners, the Ahern family, pulled money out of the business during the pandemic when it was under financial strain. Existing investors organized last year in response to the company’s moves. Representatives for the company and Oppenheimer, which was managing the new bond deal, didn’t return requests for comment.
Ahern, based in Las Vegas, was planning to sell the notes to refinance the bonds due in 2023. Combined with an equity injection from the owner, the new debt would have taken care of the company’s biggest remaining struggles as it tries to turn itself around, by boosting liquidity while addressing upcoming debt maturities. The bond sale could have potentially brought a credit upgrade from S&P Global Ratings, which said last week that failure to complete the offering could bring a downgrade.
Now the 2023 notes will not be refinanced this year, one of the people said. The last shelved junk bond was for Cooke Omega Investments Inc. on August 18, a fish-based nutrition company that had received tepid demand from investors.
Many other corporations aren’t evidently having trouble selling junk bonds: there were at least 10 borrowers on Wednesday that are looking to sell notes, and the biggest deal, a $7.77 billion sale of high-yield securities financing the leveraged buyout of Medline Industries, had orders equal to about three times the bonds on sale as of Tuesday.
Ahern’s difficulties last year pushed prices on its notes due in 2023 below 30 cents on the dollar in May 2020. Those securities had since recovered to trade close to face value, helped in August by Don Ahern, chief executive officer and controlling shareholder, telling investors he would inject $50 million into the firm to help pay down some intercompany loans ahead of the bond refinancing.
Read more: DISTRESSED DAILY: Ahern Markets New Bond to Refinance
Moody’s Investors Service upgraded the company to B3 last week, or six steps below investment grade, from Caa1, and S&P said it would probably boost the company’s debt rating if it took steps including completing the bond sale and repaying existing debt.
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