ADS Tactical talked at 10¾%-11%; $275 million notes pricing Tuesday

By Paul Deckelman

New York, March 21 - ADS Tactical Inc.'s $275 million offering of seven-year senior secured notes is expected to yield between 10 ¾% and 11%, junk market sources said on Monday.

The Virginia Beach, Va.-based defense contractor and equipment supplier to police and fire departments is likely to price its deal (B3/B) in the early afternoon Tuesday, following the closing of the order books around midday, the sources said.

They also heard that the issuer and underwriter J.P. Morgan Securities LLC had agreed to certain covenant changes in order to get the deal done, including the elimination of a special call provision that allows company to redeem 10% of notes annually at 103 during the four-year non-call period following the bonds' issuance.

Another reported change is to set the first-call price at par plus three-quarters of the coupon, rather than the usual par plus half the coupon found on most bonds.

The debt carveout was also reduced by $50 million, among other modifications to the indenture.

The company plans to use the deal proceeds to repay debt and fund a dividend.

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