Interstate Bakeries' bank debt saw heavy trading among collateralized loan obligation managers and distressed funds as the company filed for Chapter 11 bankruptcy last week. Interstate's $290 million "A," $122 million "B" and $99 million "C" loans changed hands in the 94-96 context. The company's $300 million revolver was quoted in the 96-98 range.
According to a portfolio manager holding the name, Interstate's term debt has traded around the 94 range because the company has hard assets and brands. "There has been a lot of trading activity, but the debt has not dropped," the buysider added, noting there are expectations that the debt will be taken out at par. Some CLOs though are selling due to restrictions on holding distressed credits and this could be pushing the prices down, traders speculated. Some banks are also said to have sold down exposure with one trader pointing to CoBank as a seller of a $29 million piece. Vince Harper, a v.p. with CoBank who signed Interstate's most recent amendment, did not return repeated calls. Meanwhile, a number of banks, institutional investors and distressed funds are either holding or taking an interest in acquiring the paper.
Interstate said in a release it would seek Chapter 11 protection to get the necessary time to complete an operational and financial restructuring. The company's decision to file came as no surprise to the market, which was aware of the difficulties the company was going through, a dealer noted. "There is more clarity out there," a sellside trader noted. Interstate could start a financial restructuring process or could sell pieces or the whole of its assets, the buysider said. The trader noted a restructuring is highly possible. Either way, lenders expect a 100% recovery, the buysider noted. An Interstate spokesman said the company would continue to do business as usual under Chapter 11 and could not provide further comment on the restructuring plans. J.P. Morgan is providing a $200 million debtor-in-possession facility for the bankrupt company.
Prior to filing, the baked goods company amended its revolver to restrict borrowing on the revolver to $255 million and increase pricing by 50 basis points (LMW, 9/20). The revolver is priced at LIBOR plus 3%, while the "A" and "C" tranches are priced at LIBOR plus 3 1/2%. The "B" loan has a coupon of LIBOR plus 3 3/4%. Scotia Capital, BNP Paribas, Rabobank, SunTrust Bank, Bank of America, J.P. Morgan, Bear Stearns--through 47th Street Funding, American Money Management Corp., Sankaty Advisors, CoBank, Comerica Bank, Eaton Vance Management, Farm Credit Services, Angelo Gordon & Co., Massachusetts Mutual Life, RBC Leveraged Capital, Babson Capital Management, UBS and U.S. Bank signed the ammendment.