High-yield market "too expensive" for Wise Alloys

By Paul A. Harris

St. Louis, Mo., May 10 - As the roadshow for Wise Alloys, LLC's postponed deal was winding up, the company found the high-yield market "too expensive," according to chief executive officer John Cameron.

"We started out with a number that we wanted to hit," Cameron told Prospect News on Friday. "We went way over that number in terms of what the market was willing to talk to us about in terms of rate," he said adding that the size of the deal, $150 million, was also "something larger than we really wanted to do, but we were under the impression that that was what we were supposed to do in order to make it attractive to the bond buyer.

"So for those two reasons it just got too expensive for us."

Price talk had been 11¼%-11½% on Wise Alloys, LLC/Wise Finance Corp.'s $150 million of seven-year senior secured notes (B3/B+), which had been expected to price during the first half of the week of May 6 and was postponed on Wednesday. Merrill Lynch & Co. was the bookrunner.

"We had another alternative to the bond deal," the Wise Alloys CEO added. "We had worked on two ways to go from the beginning."

Cameron declined to specify what the privately held company's alternative plan for addressing its capital requirements would be. However he said Wise would not likely attempt return to the high-yield market with another deal in the near term.

Cameron said that based upon questions investors were asking on the roadshow, the difficulties of the aluminum industry in general and the recent bankruptcy of Kaiser Aluminum undoubtedly damaged the Wise Alloys deal.

"I don't think our timing was the best," Cameron said, alluding to the Kaiser bankruptcy.

He added that although Wise Alloys is not an aluminum company, but is rather a can-stock company, high yield investors seemed reluctant to draw the distinction

"We use aluminum," he said. "And that didn't help us.

"I don't think the aluminum industry, with the exception of Alcoa and Alcan, really looks too favorable right now."

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