Crown Cork & Seal paper was active last week in anticipation of a refinancing, but there is some skepticism concerning whether investors will buy into the new deal. The market for the name has ticked up to the 97-98 range from the 92-93 range, where it was quoted last month. "It's a good solid credit, but some people just don't do the asbestos game," noted one dealer.
One investor said he was struggling with the company's leverage, which weighs in at approximately five times total debt to EBITDA, as well as its allocations to an asbestos fund and its pension plan. Crown Cork has recently upped its asbestos reserve, taking a $30 million net charge to do so. The company estimates that the asbestos liability for existing and future claims will range between $263 million and $502 million. Regarding its pension plan, the company contributed $144 million last year and expects to contribute about $125 million this year.
In its earnings statement, Crown Cork announced that it is pursuing a new $550 million revolver, a $500 million "B" term loan, and $1.75 billion in senior secured notes. Salomon Smith Barney and Deutsche Bank have committed to providing the revolver. The refinancing plan would replace the company's existing $2.26 billion revolver maturing in December of this year, as well as $900 million of senior notes maturing over the next three years.