Warnaco Debt, Stock Trade Out of Line
The Warnaco Group's bank debt traded at 43 last week, with market watchers attributing the levels to disappointing retail sales over the holidays. Levels are up slightly from 42, and dealers noted that stock levels and the bank debt are out of sync. Dealers say they're uncertain as to why. "The stock is way too high for the debt -- $1.50 to $4--so something is wrong," one market player observed. "Either the bank debt is too cheap or the equity is overvalued." Warnaco, based in New York City, markets bras to discount and department stores. William Finkelstein, cfo, would not comment.
Another dealer said in addition to the disappointing retail activity over the holidays, the now-settled licensing dispute with Calvin Klein over alleged license makes a difference. "As soon as the case came out, the stock jumped. This was positive news because Calvin Klein represented a chunk of its sales," he noted. "With the company's debt trading at 43 cents, you would expect to see the stock trading at below a dollar. This is why one side of the deal does not make sense."
Warnaco has a $1.04 billion facility that breaks down into two revolvers. It is priced at 11/4 % basis points over LIBOR. Bank of Nova Scotia, Societe Generale, Citibank NA and Commerzbank AG are the lead arrangers.