Traders said $10-15 million pieces of Federal-Mogul Corp. bank debt changed hands last week as the company filed its disclosure statement and released its quarterly earnings report. The trades were completed in the 75-76 context and the sellers were said to be banks looking to cash out. By late Tuesday, the paper was bid at the 76 level. Total trade volume in the name last week could not be determined. The earnings are in line with expectations, said one dealer. In regard to the disclosure statement, one buysider said the projections offered by the filing are not particularly upbeat, but the bank debt levels are receiving a boost as the end of bankruptcy proceedings nears. The disclosure statement offers additional details to the company's plan of reorganization, which was filed on March 6.
Federal-Mogul has approximately $1.6 billion in pre-petition bank debt claims and holders of these claims will receive roughly $1.3 billion in six-and-a-half year senior secured term loans and $300 million in 11-year junior secured paid-in-kind notes. The disclosure statement did not offer an estimated recovery value. One dealer said the PIK notes offer lenders an investment that is riskier than the term loan, but could also have a greater potential upside if the company performs well. A hearing date to approve the proposed disclosure statement and the company's plan of reorganization has not yet been announced. The company cannot solicit votes from its creditors until the plan has been approved by the bankruptcy court. Calls to Federal-Moguls' financial officials and an attorney representing the company were not returned by press time. J.P. Morgan is the agent on Federal-Mogul's bank deal.