A $20 million chunk of Crown Cork & Seal traded last Tuesday at 79 1/2, down nearly a point from the level traded at an auction the day before. Industrial Bank of Japan was the rumored seller, and J.P. Morgan was said to have bought the piece. Officials at both shops declined to comment. A day earlier, a $10 million piece of Crown Cork was auctioned off between 81-82 on news of a possible bankruptcy filing. The company's troubles center on aggressive acquisitions throughout the 1990s and declining sales, culminating in a loss of $174 million in 2000. Compounding the pressure is a $400 million bank debt payment due next year. Timothy Donahue, cfo, was traveling last week and could not be reached for comment. A spokeswoman declined to comment.
The company paid $100 million in asbestos claims in 2000 and an additional $88 million in the first nine months of 2001. In late October, the company's debt traded at 84-85 after Crown Cork announced a third-quarter earnings loss, citing pricing pressure and the impact of the U.S. dollar against foreign currencies (LMW, 10/22). About $50 million traded on an announcement that the company had a $13 million loss, as compared to $44 million profit the same time a year earlier.
Two weeks ago, Moody's Investors Service lowered the company's debt rating to Ca from Caa3. According to Christophe Razaire, v.p. and senior credit officer, pressure on free cash flow is heightened by continuing asbestos-related claims payments. Razaire notes that at $100 million a year, these payments reduce already thin cash flow.