Volatility in Crown Cork & Seal's bank debt has been caused by instability in the equity markets, as the uncertainty of whether the company will be able to complete the spinoff of Constar International grows, traders said. While the bank debt traded at the 87 1/4 level last week, one dealer noted that he had traded the paper in the 90 context the week before.
Crown Cork & Seal recently announced that it planned to increase the size of its initial public offering for the food and beverage container company from a majority of shares to its entire equity stake. Now, once again, market players are doubting that the deal will fly in the current choppy equity markets. The spinoff is an instrumental move in the company's plans to pay down debt, but it was already pulled once in August.
Market players began to spout some optimism for the paper in early September. "People are optimistic that if the bond market continues to get inflows and the equity markets stabilize, they can [spin off] Constar and the banks will get some pay downs," one trader said at that time (LMW, 9/9). Calls to Alan Rutherford, cfo, were not returned by press time.