Some lenders to Gate Gourmet International's multi-currency bank debt cut exposure last week after the troubled airline caterer, owned by Texas Pacific Group, defaulted on its mezzanine debt. Credit Suisse First Boston and Citigroup lead the bank debt, which is in negotiations to be restructured. A lender sold a Sfr14.2 million piece of the multicurrency revolver and £7.6 million of the Sfr110 million ($94 million) "A" loan at 94 3/4-95 on Tuesday. On Wednesday, a separate lender sold Sfr14 million of the revolver and £9 million of the "A" loan at 95.
The Sfr310 million ($266 million) "B" loan, split into dollar and euro tranches, was quoted at 96-98 prior to the default. Late in the week it was quoted at 96 3/8-97 1/2. "The senior bank debt is covered in most scenarios," one sellside trader explained. A buyside trader added that some funds had to sell after the company defaulted. Last month, Gate Gourmet dropped from well above par levels to stressed territory after the company disclosed bad numbers at a bank meeting Dec. 10 (LMW, 12/20). The "B" went as low as 94 1/2-95 1/2 as the market digested the company's struggles. The mezzanine tranche hit 79-80 and the multicurrency revolver traded around 92-94.
Two weeks ago, Gate Gourmet defaulted on a loan payment under the senior secured facility and an interest payment under the secured mezzanine facility. Standard & Poor's lowered the long-term debt ratings on the senior secured credit facilities and junior-secured mezzanine loan facility to D from BB and B, respectively. "Although Gate Gourmet's liquidity position at the end of December 2004 was sufficient to fund scheduled debt repayments and working capital requirements, the group chose to defer some of the payments due under its secured facilities partly in order to meet potential restructuring charges during the first quarter of 2005," according to S&P. A Gate Gourmet spokeswoman declined to comment.