'Blind pool' investing resurfaces

January 15, 1994|By Knight-Ridder News Service

NEW YORK -- Investor Carl Icahn is expected to offer $450 million of junk bonds next week, about half of which will be used for future investments in speculative deals, sources say.

The deal, similar in structure to what is known as a "blind pool," or "blind trust," is seen by fund managers as a sign of the return of a type of investing that was popular in the 1980s but has since gone out of style.

"They were notorious," said an analyst who tracks high-yield securities.

"Their most common use was as takeover pools" to fund speculative investments, he said.

"We haven't seen a blind pool for the past five years," said Bill Veronda, senior vice president and portfolio manager with Invesco Funds Group.

One portion of the deal will consist of $250 million of debt HTC through ACF Industries Corp., an Icahn-owned firm that makes rail cars, to be used for operating costs and debt repayments.

The issue is being managed by Merrill Lynch and Co.

An additional $200 million in senior secured zero-coupon notes will be issued by parent company ACF Industries Holding Corp. and used mainly to "pursue investment opportunities in undervalued situations, including interests in potentially illiquid assets, which may not be securities, such as real estate," according to the prospectus.

Mr. Veronda said he believes the deal marks a surge in confidence about junk offerings. "We're seeing the gates of the high-yield market widen increasingly," he said, with "weaker, more speculative" issues coming out.

The high-yield analyst said his firm would be leery about investing in an Icahn offering, although "Icahn has a reputation of being a very sharp guy, and a lot of people may see this as an opportunity to co-invest with the guy."

Mr. Icahn had filed a larger, $650 million version of the offering in September with the Securities and Exchange Commission, but never marketed it to investors, according to an executive involved in the deal.

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