United Site Services Non-Pro-Rata LME Transaction Is Closer to Less Aggressive End of Value Transfer Spectrum; Transaction Raises $300M in New Money but May Not Delever Co. or Reduce Cash Interest Burden

Credit Research: Ed Cerullo Relevant Item: Link to Excel Model on Analysis Page Reorg’s analysis of the United Site Services, or USS, liability management transaction indicates that it is on the side of “less aggressive” in terms of value transfer to ad hoc group members, which is in keeping with an analysis of recent non-pro-rata uptier transactions for which exchange information is available, indicating that uptier transactions have become less aggressive in terms of transferring value to ad hoc groups and away from non-ad-hoc groups. Assuming full participation of non-ad-hoc-group, or non-AHG, lenders and noteholders who have until Sept. 23 to participate in the public exchange offer, approximately $50 million of value would be moved from the public exchange participants, or non-AHG members, to the AHG member. This equates to a 25.1% reduction in value for the non-AHG in the public exchange compared with how they would have fared in a pari passu exchange scenario, while the AHG members who participated in the “private” exchange improved their recoveries by 4.4%, as shown in the chart below:   On the scale of least aggressive transaction (Valcour: negative 12% from non-AHG) to most aggressive transaction (Wesco and Mitel: negative 100% value away[...]