Holders of WestPoint Stevens' $440 million first-lien bank debt are discussing the possibility of receiving equity in the company rather than being refinanced with new debt after its paper dropped some 15 points on the back of disappointing monthly numbers. Bank of America, GE Capital and Wachovia Securities are among the lenders to the company, said a trader. Officials at the banks either declined comment or did not return calls.
The first-lien debt traded in the 74-78 range last week, down from the 93-94 context where it was quoted at the beginning of this month. Hedge funds are increasingly showing interest though, as they are more inclined to take a gamble on the story. "If you get equity, you get unlimited upside on the dollar," the trader commented.
A meeting is set to take place today between the company and lenders, but bankers would not comment on what will be discussed. Lorraine Miller, senior v.p. of investor relations, declined comment.
There is also market chatter that adjustments to the company's debtor-in-possession credit are in the works. The adjustment on the $300 million DIP is related to EBITDA covenant relief, one banker said. Wachovia Securities and Bank of America led the DIP financing (LMW, 6/5). Quotes for the more illiquid $165 million second-lien led by Deutsche Bank were not provided. The second-lien piece was done as a rescue financing in 2001 and was held by GSC Partners, Perry Capital and ESL Investments. WestPoint filed for bankruptcy protection last year after failing to de-lever the balance sheet. The first-lien, second-lien and bond creditors are now involved in a three-way tussle to reach a restructuring agreement.