Bear Stearns bought $120 million of MachGen's bank debt last week from Citigroup at 97 1/2 as rumors emerged that K-Road Ventures is in talks with lead creditor Société Générale to buy the assets. Another $100 million was offered by Bank of Scotland, but an actual sale could not be confirmed.
The indications for this paper have been well below the mid-90s, so the price has risen significantly, one trader said. MachGen's credit, previously known as GenHoldings, was put in place in December 2001 and is $1.46 billion. Despite rumors of the potential takeover, a dealer noted it is not clear from the public side what could be driving the activity. Officials at Citi and Bear Stearns declined comment. Bank of Scotland officials did not return calls.
K-Road is a New York-based firm run by entrepreneur William Kriegel. It invests in the infrastructure sector including energy, utilities, water, waste management and environmental services.
K-Road is also said to be looking to buy the Exelon Boston generating facilities being sold through a BNP Paribas-led creditor auction. The Boston area plants were developed by Exelon Corp., which decided to hand back control last summer to BNP Paribas. Secondary levels for Exelon paper have climbed since August from 89 to 112-113.
A deal for the generating facilities was down to just two bidders about a month ago. But now K-Road has reportedly proposed a bid that is a "win-win for both parties," said one official, noting the bulk of the debt associated with the facilities is owned by hedge funds. Exelon's plants are saddled with more than $1.4 billion in non-recourse bank loans, observers said. K-Road officials declined comment. Calls to BNP Paribas were not returned.