Waste Pro USA cleans up in high yield debut, cuts roadshow short

Waste Pro USA has cut short the roadshow for its USD 450m debut high yield bond due to strong demand, according to several sources tracking the situation. The waste services company is expected to price the transaction inside official talk of 5.625%—and well inside earlier whispers of 6% area—on Thursday, the sources said.

The Florida-based borrower intended to roadshow the senior unsecured deal through Thursday and price Friday, but the strength of investor demand prompted lead bank Wells Fargo to accelerate the timing, according to a source close to the transaction.

Books will close at 5pm today, but West Coast investors who had already set up roadshow calls outside of this timeframe will have until 11am tomorrow to place orders, the source said.

The company, which provides services such as waste collection, recycling, transfer and disposal, will use proceeds to repay its Libor+ 750bps USD 414m TLB due 2020 and some of its USD 96m ABL borrowings due 2019. The new notes will mature in 2026.

Waste Pro’s pro forma leverage is 5.5x, based on adjusted LTM adjusted EBITDA of USD 106.5m as of 30 September and total debt of USD 589.3m, according to the source close. For comparison, the borrower generated USD 95.2m of adjusted EBITDA in 2016 and USD 91.8m of adjusted EBITDA in 2015.

The company serves residential, commercial and industrial clients in nine states across the southeast, with a focus on Florida, which accounts for two thirds of the company’s USD 611.5m LTM revenue as of 30 September. Half of the company’s revenue comes from residential customers.

Waste Pro, which is rated B2/B+, also owns a museum in Sanford, Florida, where it displays restored antique waste collection trucks from years gone by.

Waste land

As comps, buysiders pointed to Ba2/BB+ rated Clean Harbors, whose USD 845m 5.125% senior unsecured bonds due 2021 traded today at 101.25 to yield 3.618%, along with Ba2/BB- rated, energy-from-waste provider Covanta, which has a USD 400m 5.875% senior unsecured note due 2025 that traded today at 102.125 to yield 5.419%, according to MarketAxess.

Casella Waste Systems, another similar company, printed a USD 350m TLB due 2023 last year with a coupon of L+ 275bps (1% floor). That loan last traded on Friday 19 January at 100.5/101, according to Markit.

At Waste Pro, buysiders highlighted the potential two-sided impact of its lack of landfill assets compared to competitors. Waste Pro owns 17 landfills in total, which contributed USD 11.6m of LTM revenue as of 30 September, according to the source close.

“That could be seen as a pro or a con—I would see it as a con because landfills are valuable real estate, especially in highly dense areas,” said one of the buysiders. “The government doesn’t easily permit new landfills.”

Additionally, the source close said, “If you have a space close to where you’re collecting waste, you have a meaningful competitive advantage.”

Other sources said the lack of landfill assets could be seen as positive because it reduced the costs and legislative risks linked to such sites, adding that it was clearly not an issue for investors given the deal’s strong reception.

“The market’s on fire, so in the environment, investors aren’t really going to nit-pick,” said another buysider. “You don’t get oversubscribed if investors really care about small things.”

Wells Fargo and Waste Pro did not respond to requests for comment.

CLICK HERE to read Xtract Research’s covenant analysis for the Waste Pro 2026 notes offering (Xtract subscription required)

2018 Debtwire

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