Distressed debt investors have started to pile into Collins & Aikman debt after the bank loans and bonds took a massive dive late last month. Lenders on a private call were told that the EBITDA numbers were moving lower, while JPMorgan has halved its commitment to a $300 million debtor-in-possession financing.
The $470 million term loan slid from 91 3/8-93 3/8 to as low as 72, said one bank loan trader, and that has triggered distressed buyers to step in at that level. As a result the "B" loan had ticked up to 73-75 by press time. "There was a flurry of activity then it became harder to find paper, said one dealer. He noted that some buyers are taking a view that the company is viable and will keep on making interest payments.
The company also has $915 million in senior and subordinated bonds. The 10 3/4 '11 notes are bid at 26 1/2. This is 17 points below the auction held by Markit Group and Creditex last month to settle Credit Default Swap index trades referencing the debt.
A Collins & Aikman spokesman declined to comment on the trading levels, but he confirmed that JPMorgan will only fund up to $150 million of the DIP. A JPMorgan spokesman declined comment. The auto-parts company has received a $30 million unsecured bridge financing from customers and is working to get more permanent financing in place to fill the void left by the lender. The bank also pulled out of providing a debtor-in-possession financing for Meridian Automotive (see story, page 2).
"[We're] not involved in it, I'm happy to say because it's a mess," said one investor. Another trader said in addition to general auto-sector problems, some lenders are also concerned about restatements of financial results. "We have an ongoing internal investigation," confirmed the spokesman. "We indicated that we would have a possible restatement of previous financial statements," he added.
The plastic auto-parts manufacturer filed for bankruptcy in May. JPMorgan, Credit Suisse First Boston and Deutsche Bank lead the pre-petition bank debt, which also includes a $105 million revolver and a $170 million supplementary revolver.
