OM Group's bank debt dropped 18 points to the mid-70s last week after the Cleveland-based specialty chemicals maker posted terrible results. "It's gone from being a par name to distressed territory in a couple of days," one dealer noted. Traders reported it was mostly the term loan "C" taking the hammering. As Loan Market Week went to press, the loan was being bid at 76.
Market players were divided on who is doing the buying. "The primary new issuance guys are getting out of this and the distressed funds are taking advantage," said one trader. However, one investor said the trades are small in size and the distressed players may not yet have had time to digest the name. One trader, looking on the bright side, said, "OM has dropped substantially, but nowhere near as bad as the equity." The equity was bad. OM's stock dropped from $30.75 to $7 a share during the week. On Tuesday the price plummeted from $27 to $9 a share. Tom Miklich, OM's CFO, referred questions to Greg Griffith, director of investor relations for OM. Griffith did not return calls.
After the disappointing results, the tough market conditions for cobalt is expected to hit operating results going forward, and so OM is planning to implement aggressive cost reductions and sell off non-core assets, according to a company release. Credit Suisse First Boston, National City Bank and Credit Lyonnais are the lead, administration and documentation agents, respectively, on the credit. The loan consists of a $600 million "C" piece and a $325 million revolver.