Tower Automotive’s $424 million first-lien and $155 million second-lien loans hovered above par in active trading after the company filed for bankruptcy. Tower’s first-lien traded at 100 1/4-100 3/8, before settling at 99 7/8-100 1/2, while the second lien was quoted 102 3/4-103 1/2.
Tower’s first-lien debt has a spread of LIBOR plus 4 1/4% and comprises a $50 million revolver and a $374 million “B” loan. Before the filing this debt was trading around 99 3/4-100 1/4. The second-lien loan, which is a synthetic letter of credit term loan, has a spread of LIBOR plus 7%. One trader said the debt is covered through both liens, while the second-lien paper has call protection at 102.
The Novi, Mich.-based auto-parts company has been struggling for several months from rising raw material costs, up-front launch costs and lower North American OEM levels. Also liquidity was weak, hindered by the reluctance of second-lien lenders, mostly hedge funds, to agree to an increase in the basket for a proposed accounts receivables securitization from $50 million to $200 million.
“A lot of them in the second-lien are also in the bonds and not everybody’s interests are aligned,” said a holder of the second-lien paper, on why some lenders were in favor of the increase, but not others.  The securitization facility was required to replace declining OEM early pay receivables arrangements. A Tower spokesman said he could not comment on issues with the second-lien lenders, however, he said, “We elected to file for bankruptcy because it offers a long-term and comprehensive solution for the company’s debt and liquidity challenges.”
The bank deal is led by J.P. Morgan and Morgan Stanley. The bonds comprise $258 million of 12% notes, €150 million of 9 1/4% notes and $258.75 million of 6 3/4% guaranteed trust convertibles.
 
Tower has joined a slew of auto-parts manufacturers that have filed for bankruptcy hit by an aching U.S. auto industry. Kelso & Company’s Citation Corp. and Internet Corp. filed last fall (LMW 9/27).