Icahn Seen Circling Fed-Mogul Bank Debt

  • 07 Oct 2001
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Carl Icahn is reportedly taking a position in the bank debt of Federal-Mogul, which filed for bankruptcy protection last week. Icahn, who has big positions in the company as a shareholder and a bondholder, would be looking to improve his position in the restructuring. Repeated calls to his office were not returned. Calls to G. Michael Lynch, cfo of Federal-Mogul, were referred to spokeswoman Ann Julsen, who declined to comment on players in the company's bank debt.

Making a play for the senior debt in a company that has filed for bankruptcy is not unusual for Icahn. In the case of Federal-Mogul, the only claimants senior to bank debt holders in the filing are foreign asbestos liability claims, which are estimated at 100,000. "Are the banks getting their money back? It's a question of what percentage do you lose to asbestos and is the [foreign] asbestos contained in the UK," noted a source who follows the company. Bonds were trading in the single digits last week. Federal-Mogul is based in Southfield, Mich.,

An estimated $50 million of the debt last week traded up to 521/ 2-53, up from 50, on news that the company had filed for bankruptcy protection. Goldman Sachs and J.P. Morgan are rumored to be most active in the name, but officials at both shops would not comment. Market watchers had been anticipating the filing for several months, and said it's positive news for Federal-Mogul because it caps the number of asbestos liability cases against the company.

The company has also felt the effects of an ailing auto parts sector, in part because better quality car equipment reduces demand in the after market. "There is softness in the [auto parts] sector, but the primary reason for the filing was the increasing asbestos liability," said Julsen. Federal-Mogul's EBITDA has dwindled from $1.1 billion in 1999 to the $800,000 range today. "Even without asbestos, the company was over levered," a source said. Federal-Mogul is seeking $675 million debtor-in-possession financing, being syndicated by J.P. Morgan (see story, page 5).

  • 07 Oct 2001

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Rank Lead Manager/Arranger Total Volume $m No. of Deals Share % by Volume
1 Citi 7,171 21 10.72
2 Bank of America Merrill Lynch (BAML) 6,901 20 10.32
3 JP Morgan 4,776 10 7.14
4 Credit Suisse 4,718 9 7.05
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2 Bank of America Merrill Lynch 59,056.08 169 9.80%
3 JPMorgan 56,861.85 163 9.43%
4 Citi 56,521.05 165 9.38%
5 Credit Suisse 44,888.95 123 7.45%