No. of Recommendations: 0
I got literature in the mail today about a tender offer for United Auto Group bond, but bought out/taken over by Penske Automotive Group some time ago. Bond is due in 2016, coupon is 7 3/4%.

Just looking briefly at all the language, I did see a paragraph that says if you don't tender your bond, the company won't be held to restrictive convenants and "event of default" provisions.

It also says the company is plans to take on additional debt that is more than the amount of the 2016 bonds. Maturity of this new debt will be 2022.

I interpert this as saying you might be taking on additional risk if you don't tender.

I've had bonds called before, but never gotten a tender offer before.

I'm not a lawyer, so I could be reading the language wrong.
Print the post Back To Top
No. of Recommendations: 2
When the market price for a bond is far below face value (and usually the call price) issuer will sometimes find it more economical to tender for the bond rather than call it.

But the call is forced; the tender is voluntary. So yes you can keep the bond. But obviously they would rather you tendered it.
Print the post Back To Top
No. of Recommendations: 0
Thanx for the reply.

Yes, good point that a tender offer does not have to be accepted.

But my point was that...if I'm reading the language in the tender offer correctly....if you chose to keep the bond, some of the covenants might no longer apply, so that bond might not be as protected as it was before the tender offer.

But, I'm no lawyer, so maybe I'm not reading the language correctly.

I only have a paper copy of the offer, otherwise I'd to a cut and past. I'm sure someone could find an electronic copy of the tender offer online if they wanted to check it out. The wording is about 3/4 of the way through the offer, which was about 20 to 25 pages.
Print the post Back To Top
No. of Recommendations: 0
It looks to me from here:

http://investors.penskeautomotive.com/phoenix.zhtml?c=82644&...

that the original bond indenture must have had provisions allowing a majority of bondholders to amend the covenants governing the bond. According to that press release, the company is requiring a legal consent to the amendments from the bondholders in order for bondholders to receive the tender payment. Presumably, if the company doesn't get a majority of investors tendering their bonds, then it can't modify the covenants.

This is all conjecture because the press release doesn't even include the full terms of the offer, let alone the original indenture document. So I could easily be completely wrong.

good luck,
dan
Print the post Back To Top
No. of Recommendations: 3
A "tender offer" always sounds like something you might get in a seedy bar.

Unfortunately, offers like this usually attempt to have a coercive element aimed at any would-be holdouts. In this case (as is pretty common), it sounds like the issuer's aim is to offer a premium price that includes a consent payment to the bondholders. Under the terms of most junk indentures, if a supermajority (usually 2/3 of the issue and/or half of the holders) of bodowners accept the tender and consent payment, the indenture is allowed to be altered for any remaining bonds that did not tender. Most of the time, this alteration takes the form of gutting covenants and other protections in favor of the bondholders. As such, I would suggest that you tender your bonds especially if the offer is par or better. You don't want to be left holding paper tat has lost all of its protections.
Print the post Back To Top
No. of Recommendations: 0
I'm in total agreement.
Print the post Back To Top