Tower Automotive's second-lien loan traded as high as 104 3/4 last week as some distressed investors cashed out and others bought the richly priced debt. The $155 million second-lien tranche is being replaced with a facility led by SilverPoint Finance.
One lender explained that some hedge funds had bought the debt last year in the expectation of a classical restructuring and wanted a share of potential equity. SilverPoint has come in with more of a banking mentality by providing a bullet-proof loan, he added.
The debt is trading this high because the LIBOR plus 7% spread is also being increased. Prior to the bankruptcy the debt was trading at 102-103. J.P. Morgan is also leading a $725 million debtor-in-possession facility that will repay the first-lien prepetition debt. Calls to Edward Mule, a Silver Point principal, were referred to a spokesman, who could not provide comment by press time.