United Rentals last week announced that it is soliciting consents for amendments to the indentures governing its bonds and QUIPs securities, which would allow the company additional time to make certain Securities and Exchange Commission filings. As previously reported, United has delayed filing its annual report for 2004 and first and second quarter reports for 2005 because of an SEC inquiry into short-term equipment sale-leaseback transactions and other accounting issues.
The filing delay could lead to a default if the company were to receive a notice from the trustees or from 25 percent of holders of any of its bonds. The consents seek waivers that, if granted by 50 percent of the holders, would eliminate the possibility of a default notice by permitting the delay.
The indentures for the securities – 6 ½ percent senior notes due 2012; 7 ¾ percent senior subordinated notes due 2013; 7 percent senior subordinated notes due 2014; 1 7/8 percent convertible senior subordinated notes due 2023; and 6 ½ percent convertible quarterly income preferred securities – require the company to timely file required annual and other periodic reports with the SEC. The proposed amendments would allow the company up until March 31, 2006, to regain compliance with this requirement and waive any violations of the requirement that have already occurred.
United is offering a consent fee of $2.50 for each $1,000 in principal amount of notes as well as additional fees.
If United were to be held in default of the reporting requirement, it could adversely affect its ability to refinance its debt. “If we could not refinance our debt, we might be unable to meet payment obligations unless we engage in an extraordinary transaction, including an asset sale, and any such transaction might have a significant adverse affect on our business and financial condition,” wrote United in a document filed with the SEC last week. “Further, if we are unable to repay or refinance our debt, as it becomes due, we could be forced to restructure our obligations or seek protection under applicable bankruptcy laws or an involuntary bankruptcy proceeding may be brought against us.”
The consent solicitations will expire September 7. United has retained Credit Suisse First Boston to serve as solicitation agent.
In a related development, Standard & Poor’s Ratings Services last week said last week that United and its BB corporate credit rating remain on CreditWatch with negative implications.
“Although the company has not received a notice of default from any bondholders, if URI were to receive notices from bondholders representing a substantial amount of the debt, it might not have sufficient funds available to repay all its public debt in a timely manner,” wrote an S&P analyst. “If the adverse scenario materializes, we could lower the ratios by multiple notches.”
Greenwich, Conn.-based United Rentals is No. 1 on the RER 100.
