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Finova Soars On Berkadia Bid

04 Mar 2001

A whopping $300 million in Finova Group bank debt traded last week and levels climbed about 10 points as the market jumped all over news that Berkshire Hathaway and Leucadia National Corp stepped up with a bailout bid for the company. Activity was so heated that even some par desks were chattering about it, but euphoria died down a bit by the end of the week as traders noted there were still some big issues to be ironed out. Bids dropped back from 87 to 80. Bear Stearns, Credit Suisse First Boston, Deutsche Bank, and J.P. Morgan Chase were said to be the shops most actively trading the name. Calls to Bruno Marszowski, cfo of Finova, were not returned.

Traders said the biggest draw to the name was the presence of Warren Buffett, whose Berkshire Hathaway would team with Leucadia to provide $6 billion to Finova. The company would use it to pay down its $11 billion in bank debt and bonds. "He's [equated with] very smart money," one trader said of Buffett. "This demonstrates smart pockets are backing this." Buffett had been buying chunks of Finova's bank debt and has also shown interest in Conseco's bank paper and bonds (LMW, 1/7). "He sees not much value in stocks, and sees opportunity from distressed because there's a lot of supply," said one dealer, giving his take on why the investor has turned his attention to bank debt. A spokeswoman at Berkshire Hathaway did not return calls.

Dealers said, among the obvious benefits to Finova, the proposal shows good faith in the company. "It's another deal on the table, [and it shows] more confidence that somebody's going to figure it out," said a trader. The dealer believes this deal has replaced the proposal Goldman Sachs and General Electric Capital Corp. had to take control of the company. Still, he added, "They're not out of the picture. It's not dead." A spokeswoman at Goldman declined to comment. A spokesman at GE Capital said, "We never said we were or weren't in negotiations with Finova."

Another trader active in the name believes Buffett's name outshines any other potential suitors of Finova, including Goldman and GECC. "Obviously they're no longer the leaders in the clubhouse. Warren Buffett is in the lead, and the other guys are nothing," he said.

Finova has $4.6 billion in credit facilities, with $1.6 billion slated to expire this May. Citigroup leads the deal. A bank spokesman declined to comment.

04 Mar 2001