Trading on Global Automotive Logistics' bank debt started to pick up last week as the bankrupt French auto supplier's talks with Renault to renew a supply contract appeared to be faltering. A dealer said it is usually difficult to find sellers of GAL's bank debt, but several holders started to sell their positions last week. "There are a number of sellers that want to sell at a discount," he said.
The Royal Bank of Scotland leads GAL's bank debt, which has been trading in the low 90s for the past few weeks. The bonds have slipped into the high 60s from the low 70s, said the dealer. GAL is in talks with French auto maker Renault to renew a supply contract that expires in March 2008, said a spokeswoman. She said the companies are likely to renew the contract. "The link between the group and Renault is very strong," she said. GAL relies on Renault for 80% of its business, the spokeswoman said.
GAL entered bankruptcy protection in May (CIN, 5/26). The bankruptcy filing gives it time to restructure its debt. During this time, it does not have to pay interest payments to its creditors. GAL has E100 million of bank debt and E100 million of unsecured notes.
GAL's contract with Renault constituted 71% of its revenues in 2005 (5/26). The contract has been unprofitable because Renault has moved some of its production outside of France, resulting in higher transport costs for GAL. Rising oil prices have also hurt the company.