Oneida's bank debt has climbed from the 80s to trade in the 92-93 context last week and some investors and bankers believe the paper could move above par as the bank debt is set to be partly equitized and the rest refinanced with new bank debt paying a scorching rate. Oneida, which makes flatware and dinnerware, reached an agreement in principle with its lenders on a comprehensive restructuring plan converting $30 million of principal bank debt into approximately 62% of Oneida's common stock, explained an Oneida spokesman. The remaining indebtedness will then be restructured into a $125 million, second-lien, three-year "A" loan and a third-lien, $80 million, three-and-a-half year "B" loan. The spokesman could not provide a valuation on the equity.
The last amendment was signed by investors including Anchorage Capital, Quadrangle Group and SPS High Yield Loan Trading. The original lenders that signed the last amendment include agent bank J.P. Morgan, Banc of America Securities, M&T Bank, Banca Nazionale Del Lavoro and Bank of Nova Scotia. Banc of America Strategic Solutions, a subsidiary of B of A that operates problem asset resolution, also signed the amendment. Roger Odell, a workout banker at J.P. Morgan signed for SPS. Officials at the banks and funds either declined comment or did not return calls.
The proposed "A" loan will be priced at LIBOR plus 6-8 1/4% depending on leverage to cash flow and the "B" loan will be priced at LIBOR plus 13% with a ceiling of 17%. Interest for the first year on the "B" loan will not be paid in cash, but will be added to the principal of the "B" loan. In the second year, 70% of interest will be added to the principal and for the third year, up to 30% of interest will be added. One banker explained the debt is priced at these levels in order to make it trade at par. A new first lien, $30 million revolver is also being provided and the restructuring is expected to be completed by mid-August.
"The deal is a positive outlook," said one distressed loan investor not active in the name. He added that the bank debt holders have a shot of making more than par recovery as the bank debt is converted to equity. This will lead to equity dilution, but will reduce debt, enabling the company to grow into its capital structure," he added. However, one trader was skeptical the paper could trade much higher than its current levels. "It does give the possibility of going above par, but they need to improve cash flow." Another trader on a distressed desk was even more skeptical, noting that the cash flow of the company is not that strong.