A potential takeover of Meridian Automotive Systems by a financial sponsor and another auto-parts company is driving trading in the company's $165 million second lien. The debt was offered at 76 early last week, but traded between 83 1/2 -85 1/2 last Thursday, according to traders. Officials at the company did not return calls. There are well-documented problems in the auto-parts sector with a number of rivals struggling or declaring bankruptcy, including Tower Automotive. But a distressed loan trader said the price is right and there is value in the company. "If you look at the business there's real long-term value. It has great platforms," he added.
"Meridian makes interior and exterior plastic components for automobiles," said John Puchalla, a Moody's Investors Service analyst, commenting on why Meridian could be a target. "Automakers would like to reduce the weight of vehicles to improve fuel efficiency. So, if a plastic component can replace an existing auto part without sacrificing performance and design flexibility then you can improve fuel efficiency. The auto companies are also putting greater emphasis on the design of interiors as a means of adding value to consumers. This can benefit interior component suppliers such as Meridian."
Meridian's second-lien is priced at LIBOR plus 9%. The company also has a $230 million first lien tranche priced at LIBOR plus 4 1/2%. The first lien is quoted close to par. Credit Suisse First Boston leads the bank debt.
A number of competitors have been bought by private-equity firms, such as Kelso & Co.'sCitation Corp. and Heartland Industrial Partners' Collins & Aikman. The Blackstone Group has TRW Automotive in its stable andThe Carlyle Group owns Grand Vehicle Works.
