Two New Offerings Coming To The HY Market


Two companies in completely different industries have laid the groundwork for trips to the high yield market next year.

Concrete maker RMC Group plc and electric power concern InPower Ltd. recently completed their respective bank facilities, and portions of those loans are slated to be taken out by future high yield offerings.

RMC just closed on a GBP2 billion ($3.2 billion) bank loan to help finance its acquisition of the U.K.'s third-largest cement producer, Rugby Group plc. And part of the overall financing is a one-year, GBP550 million revolver, which will be re-financed through the high yield market in the first six months of 2000, according to market observers familiar with the company.

The price of cement - one of the key ingredients in concrete - has been on the rise, so the acquisition is viewed as beneficial to RMC as a way to vertically integrate. In fact, it's thought that the market may be on the verge of seeing other similar ventures between concrete makers and cement producers. Last month, in fact, Anglo American plc announced that it placed a recommended cash offer for Tarmac plc, an aggregate and concrete producer. And outside the U.K., number-two building materials maker Hanson plc has agreed to buy Sydney, Australia-based Pioneer International Ltd., the third-largest concrete producer in the world, for A$4billion ($2.5 billion).

The other high yield deal waiting in the wings is from InPower Ltd., a wholly owned subsidiary of AES Corp, the largest U.S. power plant developer.

InPower completed a GBP1.3 billion ($2 billion) bank facility that will be used to partially finance the $3 billion acquisition of U.K.-based Drax Power Station, the biggest coal generator in Western Europe. It produces about 8% of the electricity used in England and Wales.

Of the full amount, a $250 million bridge loan provided by Goldman Sachs and Donaldson, Lufkin & Jenrette, will be taken out with high yield debt, according to Michael Armstrong, group manager at AES.

The acquisition of Drax is the largest to date for AES, which owns parts of more than 100 power plants around the world.

InPower's bank loan will include Chase Manhattan, Deutsche Bank and Industrial Bank of Japan as the lead arrangers. Co-arrangers will include Abbey National, Bank of Scotland, Bank of Tokyo-Mitsubishi, Bankgesellschaft Berlin, Fortis Bank, MeesPierson, HSBC, National Australia Bank and Rabobank.

RMC's bank loan has Warburg Dillon Read, Commerzbank, Deutsche Bank, Dresdner Bank, Greenwich NatWest and HSBC as the managers.