Credit Suisse First Boston has moved into poll position to lead a $75 million debtor-in-possession financing for Meridian Automotive Systems. The bank has stepped up to avoid a priming dispute with the first-lien lenders, according to an amended motion filed with the bankruptcy court. A final hearing on the proposal is being held June 29 at 12:30.
Originally, the auto-parts maker expected to receive a $375 million DIP from JPMorgan, after filing for bankruptcy in April, but following revisions to 2005 operating forecasts caused by production cutbacks from the original equipment manufacturers, this was shelved. The company then received interim access to a $30 million DIP until the end of the month and sought alternative financing.
Deutsche Bank proposed a $75 million DIP and received a fee of $300,000, but this was highly contentious as it sought to layer an additional $75 million of debt above the first-lien debt. "The new [Deutsche Bank] financing merely shifts the risks associated with lending money to this company from the DIP lenders to the first lien lenders, a result that is entirely consistent with the bankruptcy code," according to objections from an informal committee of first-lien lenders.
The senior secured debt is led by CSFB and comprises a $235 million term loan and a $75 million revolver. There is also a $165 million second-lien loan. The first lien term loan is quoted on Markit at 90 3/4-92 1/2. The second-lien, which has default pricing of LIBOR plus 11%, is quoted at 45-51. Anchorage Capital Group, Caspian Capital Partners, Halcyon Fund, Stark Investments and Goldman, Sachs & Co. are on the ad hoc committee for the first-lien lenders. Soros Fund Management, Stanfield Capital Partners and Davidson Kempner Advisers sit on the steering committee for the second lien.
The Deutsche Bank and CSFB proposals are similar, but according to the motion supporting the CSFB DIP, the latter proposal contemplates a consensual priming. The first-lien lenders under the CSFB terms will receive qualified priority treatment under the CSFB proposal covering $126.3 million. Another difference is pricing. The CSFB DIP is priced at LIBOR plus 3 3/4%, compared to the Deutsche Bank proposal that is 75 basis points cheaper. Furthermore, under the CSFB offer, the first-lien lenders would be entitled to receive the current payment in cash of all the postpetition interest at LIBOR plus 7%, of which 5% is paid in cash and 2% shall accrue. This increases the non-default pricing by 50 basis points. Spokesmen for CSFB and Deutsche Bank declined comment and a Meridian spokesman did not return calls.
