By Paul A. Harris
St. Louis, Mo., Nov. 27 - Toll Corp. sold $150 million of 10-year senior subordinated notes (Ba2/BB+) in an off-the-shelf, drive-by deal Tuesday at par, yielding 8 ¼%, in line with the 8 1/8%-8¼% price talk, according to a source close to the deal. Banc of America Securities was bookrunner.
Toll Corp. is a financing subsidiary of luxury homebuilder Toll Brothers Inc.
Pricing of the new notes reflected the recent rise in Treasury yields, according to the firm's chief financial officer and senior vice president Joel Rassman.
"The interest rates went an eighth against us in one day basically," Rassman told Prospect News.
"We started this a week ago and basically had a deal. Then we saw a 50 basis points increase in interest rates on the Treasury side and a little bit of a fallback after the deal closed today. But it was still 50 basis points difference. And my deal got done at the top end of the range - 12.5 basis points above the talk.
"I think Banc of America Securities did a great job," he added.
Rassman said that there was considerable competition among investment banks to bring Toll Corp.'s deal to market, competition driven by reverse inquiry from the buy side.
"We have a clientele that follows us," he commented. "We talk to our investors, and our investors talk to us on the bond side. We had seen an interest and knew that it was real.
"We never go to the market when we need money," Rassman added. "We only go to the market when the market is receptive. And given the times of uncertainty that exist as a result of Sept. 11, it's nice to have a little bit of a cushion put away for opportunities that develop that you wouldn't have otherwise considered. And this is also a protective measure for us."
Still, Rassman allowed, coming into the present high yield market resulted in a bond deal that was somewhat expensive, in a historical context.
"Our spreads have generally been lower than that in the last few deals that we've done," he said. "But given the fact that the high yield markets have not shown the same resiliency that the Treasuries have, there's been a widening of the gap.
"This is a relatively good pricing, even though I think our last deals were at better spreads."
Issuer: Toll Corp.
| Amount: | $150 million
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| Maturity: | Dec. 1, 2011
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| Type: | Senior subordinated notes
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| Bookrunner: | Banc of America Securities
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| Coupon: | 8¼%
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| Price: | Par
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| Yield: | 8¼%
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| Spread: | 322 basis points over 10-year Treasury
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| Payments: | June 1 and Dec. 1, beginning June 1, 2002
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| Call features: | Callable on Dec. 1, 2006 at 104.125, then at 102.75, 101.375,
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| declining to par on Dec. 1, 2009 and thereafter
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| Equity clawback: | 35% at 108.25 until Dec. 1, 2004
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| Settlement date: | Nov. 30 (T+3)
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| Ratings: | Moody's Ba2
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| Standard & Poor's BB+
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| Cusip: | 889479AJ0
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| End
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