Credit Suisse First Boston landed the lead role on a $75 million debtor-in-possession financing for Meridian Automotive Systems after first-lien lenders objected to a Deutsche Bank-led proposal that was floated last month. CSFB, which led the pre-petition debt, stepped up to avoid a priming dispute with lenders, explained a market official.
According to a banker, CSFB was able to reach agreement with first and second-lien lenders. The two proposals were similar, but according to the motion supporting the CSFB DIP, its financing contemplates a consensual priming. The first-lien lenders under the CSFB terms will receive qualified priority treatment covering $126.3 million. The CSFB DIP is also priced 75 basis points higher at LIBOR plus 3 3/4%. Further, the first-lien lenders would be entitled to receive the current payment in cash of all the post-petition interest at LIBOR plus 7%, of which 5% is paid in cash and 2% shall accrue. This increases the non-default pricing by 50 basis points. Spokesmen for CSFB, Deutsche Bank and Meridian declined comment.
Originally, the auto-parts maker expected to receive a $375 million DIP from JPMorgan after filing for bankruptcy in April. But following revisions to 2005 operating forecasts caused by production cutbacks from the original equipment manufacturers, the DIP was shelved.
Deutsche Bank proposed a $75 million DIP and received a nonrefundable fee of $300,000, but this was highly contentious as it sought to layer an additional $75 million of debt above the first-lien debt. "The new [Deutsche Bank] financing merely shifts the risks associated with lending money to this company from the DIP lenders to the first-lien lenders, a result that is entirely inconsistent with the bankruptcy code," according to objections from an informal committee of first-lien lenders. According to several bankers, Deutsche Bank was brought in as a stalking horse and it was unlikely that the bank would have been selected to lead the financing.
The senior secured prepetition debt is led by CSFB and comprises a $235 million term loan and a $75 million revolver. There is also a $165 million second-lien loan. The first-lien term loan is quoted on Markit at 90 3/4-92 1/2. The second lien, which has default pricing of LIBOR plus 11%, is quoted at 45-51.
Anchorage Capital Group, Caspian Capital Partners, Halcyon Fund, Stark Investments and Goldman Sachs are on the ad hoc committee for the first-lien lenders. Soros Fund Management, Stanfield Capital Partners and Davidson Kempner Advisers sit on the steering committee for the second lien.