$150m (+26.25m) sen unsec cb coming tonight from CITI/FBR. Terms 5 yr, 3-3.5% up 27.5-32.5%, pctns. UOP = gcp. Small $800m co which doesn’t see titanium supply/demand inbalance to unwind until 2H11 earliest.
PF Cash = 304m
Debt = 175m
LTM EBITDA = 24m
FCF = 6m
Lev = 7.3x
Cap ex w/remain high until next year & co has good liquidity with undrawn $150m revolver (see credit color). Implied CCC+ we’d use L+750. Small ADV = 350k, no leaps (s/dated 6/11 35c ~44iv w small oi) 2 yr 90d/50 ile = 64/54. Due to credit profile/stk liquidity we’ll cap vol at 35%. Theo = 103.1. optics really not compensating you for risk plus this is big deal vs mkt cap. Some obv x/over interest may offset size o/wise too big in weak mkt mid/cheaps for us to match cheaper sndy.
Producer of titanium mill products, fabricated titanium, and specialty metal components.
RTI is a small titanium prod. Hit hard by downturn, w/sales & ebitda down significantly driven by comm aerospace mkt. Management doesn’t expect excess inv & destocking supply chain resolved before 2H11 & maybe later, leading to uncertsin near-term outlook. Cap-ex remains elevated for another yr as new fac completed & expand others. Primary comps are ATI & TIE, both much larger. Revolver decreased to $150mm, nothing drawn.
Our assigned spread
L+750