Finova Group's debt popped to 85 1/2 from the low 80s last week and about $100 million changed hands in a series of trades as competing bidders for the company tried to best one another. A revised proposal from Goldman Sachs' and GE Capital sparked trades early last week, with ABN-Amro rumored to be among the biggest sellers of the name. A bank spokeswoman did not return calls. Levels were nudged up half a point on Friday to 86 when Berkadia weighed in with a new proposal of its own.
A market player pointed out that actual trading levels have lagged in the 85 3/4 range. He discounted any major reaction to the Berkadia offer. "It's a slight modification," he said. Levels had been inching up over the past couple of months on market rumor, as Goldman and GE made a $7 billion counter offer to Berkadia's bid. "The question now is, what are people going to collect?" a dealer said last Thursday.
Traders said Berkadia's new proposal eliminates due diligence and speeds up a deal, making it more enticing. "The deal that was put out is superior; it's firm," said a trader. "With [Goldman Sachs' and GE Capital's] deal you still have to get due diligence. Berkadia's offer says you can't look and say there's something you don't like, so the deal's off. It puts the probability of it going through that much higher." However, the dealer believes the struggle for control of Finova "is not over." Berkadia proposes to issue new 10-year senior notes of Finova that will have an interest rate of 7% a year. Calls to Bruno Marszowski, cfo of Finova, were not returned. A spokeswoman for Goldman Sachs declined to comment. A spokesman for GE Capital said, "We are continuing to work with Finova's creditors and we believe GE Capital has reached a competitive arrangement, and that is the state of play." A spokeswoman for Berkadia did not return calls by press time.
A $45 million chunk of Finova's debt traded at an auction at 81 in late April [LMW, 4/25]. Last week one dealer said the announcement was no major surprise to a market that had long been awaiting the takeover. "There's so much supply, it's being absorbed into the high-yield market," he said, adding that he doubts levels will bounce up much further. Finova has a $1.6 billion deal that breaks down into two tranches. Pricing is 35 basis points over LIBOR. Citibank and Commerzbank are the lead arrangers, according to Capital DATA Loanware.