Neff second-lien lenders object to exchange offer for 10% notes

By Angela McDaniels

Tacoma, Wash., Dec. 8 - The lenders under Neff Corp.'s second-lien credit agreement may take legal action to prevent the company from completing its offer to issue new senior secured first-lien term loan debt due May 2013 in exchange for outstanding 10% senior notes due 2015, according to an 8-K filing with the Securities and Exchange Commission.

The company said it received a letter on Dec. 3 from a law firm purporting to represent lenders of a majority of the outstanding debt under Neff's second-lien credit agreement.

The letter asserts that the second-lien credit agreement does not allow the elevation of the senior notes to senior secured debt status with lien priority superior to the liens securing the second-lien lenders.

Neff said the letter also asserts that the intercreditor agreement among Neff and other parties does not cover an exchange of senior notes for new term loans but instead the receipt of new money by the company in exchange for increased first-lien debt.

In the letter, the lenders said they reserve all rights and remedies, including the right to begin legal action against Neff, its officers and directors, the trustee, the agent under Neff's credit agreements and any other party participating in or benefiting from the offer.

In response, Neff said it believes the assertions in the letter are without merit and that it plans to proceed with the offer.

As of Dec. 2, Neff had received tenders and consents from holders of $168.7 million, or 73%, of the $230 million notes.

The consent deadline was 5 p.m. ET on Dec. 4, and the offer will expire at 11:59 p.m. ET on Dec. 15. The settlement date is expected to be Dec. 16.

For each $1,000 principal amount of the notes, investors will receive $450 principal amount of the term loan, including $50 for notes tendered by the consent deadline. Investors also will receive accrued interest to the settlement date.

The offers are conditioned on obtaining the required consent of lenders under the credit agreement and a minimum tender of at least one-half of the principal amount of notes outstanding.

Interest will be Libor plus an initial margin of 350 basis points and will be payable quarterly.

Miller Buckfire & Co., LLC (Attn: Adam Fitzner at 212 895-1865 or Ofir Nitzan at 212 895-1871) is dealer manager. D.F. King & Co., Inc. (800 628-8536 or 212 269-5550) is information agent and exchange agent.

Neff is a Miami-based equipment rental company.

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