Reliant Resources Inc. said Friday that its originally planned $350 million bond sale, which turned into a sale for $1.1 billion worth of senior secured bonds, has gotten better-than-expected interest from investors. The sale is slated to close Tuesday (July 1).

Last spring, Reliant obtained a $6.2 billion refinancing package earlier this year, with most of the debt due in 2007. Included in the transaction was a required payment in 2006 and incentives if the company managed to pay down three debt targets early (see Power Market Today, April 2).

To replace some of the bank facility, Reliant planned to sell its long-term debt beginning in 2004. However, as interest in the junk bond market increased, Reliant officials instead placed $350 million in bonds for sale with a proposed rate of 10%, which has proved to be the right move.

Rex Clevenger, Reliant’s senior vice president of finance, said the bond sale had gotten an “incredibly strong reception,” allowing the company to be opportunistic in its financing moves. Now, instead of the $350 million in bonds, Reliant will sell $550 million of notes with a 9.25% rate that come due in 2010 and a series of bonds paying 9.50% interest that are due in 2013. Proceeds will be used to pay down its bank credit facility and hit is early targets.

Several factors helped Reliant make the bond sale worthwhile, said Clevenger, including the bank financing package completed earlier this year. It also has seen business increase in its retail unit.

Analyst Lasan Johong of Blaylock & Partners noted that the junk bond market is going well for investors now, making Reliant’s offering attractive. If a company shows signs of making it, as Reliant appears to be doing, high-yield bonds are extremely attractive to investors, he said. The only caveat, he pointed out, is that Reliant will actually pay higher interest rates on the bonds than on its bank loan, which it could have avoided if it had waited and tried to sell the bonds at a lower rate.

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