An institutional fund sold approximately $50 million of Federal Mogul's revolving bank debt last week. The paper was bid around 97. The institution that bought the paper could not be determined. The sale caused Federal Mogul's bank debt to trade up to the high 90s, according to dealers. The company's revolver was trading at 94 1/2 the week prior, while its term loan "B" was trading at 95 5/8.
Federal Mogul's bank debt has gradually been climbing the past few months. The debt had been trading in the 92-93 range at the beginning of February, according to Markit. A trader said there is an expectation the company will emerge from bankruptcy soon. The increase in trading levels probably prompted the fund to sell its exposure, he suggested, adding that a lot of institutional funds have exposure to the revolving credit facility. JPMorgan leads the $1 billion revolver, as well as the company's $346 million term loan "B." The auto supplier also has a $150 million term loan "C" led by Bank of America. Citigroup leads its amended $775 million debtor-in-possession loan. In November 2005, it increased its $500 million DIP facility by adding a new $275 million term loan.
Federal Mogul filed for bankruptcy in October 2001 because of mounting asbestos liabilities. It had a $334.2 billion net loss at the end of 2005, compared to a $334 million net loss for the same period of 2004. In a release, Jose Maria Alapont, ceo, blamed industry challenges, such as increased pension costs, raw material cost inflation and higher interest rates, for the bad financial performance. A spokeswoman did not return calls seeking comment.