Fed Mogul Levels Soften; Cash Flow Covenant A Concern

  • 08 Jul 2001
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Offers for Federal Mogul's bank debt have pulled back to the mid-60s from the high 60s and an analyst said it may be heading for a covenant violation if the company's current trend continues. Market players say the paper hasn't traded in weeks as the flurry of companies filing for Chapter 11 has put market players' attention elsewhere. The Southfield, Mich.-based company makes components for cars, trucks, and construction vehicles. Calls to a spokesman were not returned.

Moody's Investors Service recently downgraded the company's debt to B3 from B2 due to concerns over possible covenant violations. Lisa Matalon, senior analyst, said she is concerned that there is potential for the company to violate the senior secured bank financial covenants in 2001, despite two recent amendments to the required levels. The downgrade comes as no surprise to dealers. "The asbestos issue is big and their operations are weak," a trader noted. "Plus the big manufacturers are squeezing them on pricing."

Dealers are awaiting the release of auto sales within the next couple months. "It gives a feel for how the OEMs (original equipment manufacturers)--the Fords and the GMs--are doing," one trader noted. "Their numbers lately have been surprisingly good, and if the trend continues it's good for companies like Fed Mogul." He added that cars that have been produced within the last three years will likely be on the road four years from now, by then due for maintenance and repair work. Matalon says any connection between the OEM market and after market is longer term, close to 10 years. "Parts are lasting longer," she noted. Last year, the company got $550 million in financing from J.P Morgan to help pay for asbestos liability. The restructured deal, which had been pari passu, now puts the $550 million as number one, the pre-existing bank debt as two, and the bonds as three.

  • 08 Jul 2001

GlobalCapital European securitization league table

Rank Lead Manager/Arranger Total Volume $m No. of Deals Share % by Volume
1 Bank of America Merrill Lynch (BAML) 7,026 25 11.95
2 Citi 6,449 21 10.96
3 BNP Paribas 5,093 18 8.66
4 Barclays 4,040 11 6.87
5 Lloyds Bank 3,615 14 6.15

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1 Citi 1,712.34 6 12.44%
2 SG Corporate & Investment Banking 1,292.64 1 9.39%
2 Rabobank 1,292.64 1 9.39%
4 Mizuho 1,215.54 3 8.83%
5 Wells Fargo Securities 1,012.71 4 7.36%