The trading levels for auto-part makers continue to fall as companies in the sector struggle with high raw materials costs and fixed-long term contracts from original equipment manufacturers. Meridian Automotive Systems' $175 million second lien was quoted in the 88-90 range, down from 94 1/2-95 1/2, where it was quoted at the beginning of the month. Tower Automotive's $425 million first-lien loan and $155 million second lien moved down to the 97 1/2-98 and 97 3/4-98 1/2 context, respectively. The first lien had traded in the 98 1/2-99 1/4 context at the beginning of the month.
The spike in scrap steel prices to $395 from $210 per ton is a major factor. But Tower's recent problems are also attributable to high exposure to Ford [Motor Co.], which has cut production levels, as well as cancellation of the industry's early pay accounts receivable discounting programs, high debt and leverage levels, and a heavy program launch schedule that is using up a lot of liquidity, stated one credit analyst.
Intermet Corp.'s $210 million "B" loan has moved in the other direction though and has recovered in trading to the 94-95 context from the 78-80 context since filing for bankruptcy last month (LMW, 9/27). Intermet cited the unprecedented rise in scrap steel prices as the reason for the bankruptcy and at the time Joseph von Meister, senior analyst of distressed and special situations at Jefferies & Co., agreed that prices were unbelievably high relative to historical levels. Officials from Tower, Meridian and Intermet did not return calls.