The $165 million second-lien loan for Meridian Automotive Systems continued to get hammered last week after a lender call revealed weaker financials. The paper was offered at 50-55 after the call, but one trader on a distressed desk suggested the real level could be lower. The Dearborn, Mich. based company filed for bankruptcy in April and has since found the Chapter 11 process tough going amid some wrangling between the company and lenders and lower volumes announced by its Original Equipment Manufacturer (OEM) customers. A Meridian spokesman did not return calls.
The second-lien paper was quoted 76-78 after the filing, but at that point the company expected to receive a $375 million debtor-in-possession financing from JPMorgan. This has since been pulled with the company receiving extended access to an interim $30 million DIP until the end of the month.
Meridian said its request to extend the interim access was the result of ongoing discussions with its lending group regarding revisions to its 2005 operating forecasts. These revisions were driven by recent reductions in production volumes by OEMs.
The company then tried working with its pre-petition lending group for an appropriate DIP financing that took into account revised 2005 operating forecasts. According to bankruptcy filings, the company negotiated with the admin agent for the first-lien lenders but found the terms for a proposed DIP unacceptable in several highly material areas. As a result the company contacted alternative lenders and Deutsche Bank has now submitted a proposal. This is expected to be smaller than the first potential DIP and will not cover the outstanding amount under the first-lien credit agreement. As LMW went to press Deutsche Bank was seeking a nonrefundable $300,000 work fee for proposing the financing and completing the due diligence and underwriting process.
Credit Suisse First Boston leads the pre-petition debt, which also comprises a $230 million first-lien loan. Meridian's first and second-lien loans are priced at LIBOR plus 4 1/2% and LIBOR plus 9%. According to bankruptcy documents CSFB, Anchorage Capital Group, Caspian Capital Partners, Halcyon Fund, Stark Investments and Goldman, Sachs & Co. are on the ad hoc committee for the first lien. Soros Fund Management, Stanfield Capital Partners and Davidson Kempner Advisers sit on the steering committee for the second lien.
Additionally, Lazard Freres & Co. was seeking to be retained as the investment bank to Meridian. In addition to $150,000 a month, the bank was looking for a $4 million fee payable upon completion of a restructuring.
