Mirant Corp.'s bank debt has been volatile in the secondary market this week with rumors suggesting that the company lowered its projections for the next year. The company is also believed to have drawn down on the letters of credit against its '04 revolver, sending that paper into the 56 1/2-58 1/2 range. The drawdown caused '05 bank debt holders to worry and that loan dipped as low as the 69-71 context, according to traders.
Although Mirant bank debt is pari passu with the company's bonds, the '04 and '05 revolvers have net-backs from unfunded letters of credit and usually trade at a premium to the company's other unsecured debt. The company's '03 revolver is trading in the 55 1/2-57 1/2 range. A Mirant spokesman said that the company has shared its new business plan with its creditor and equity committees but that the plan and its contents are private.
Ispat Inland is inching up toward par on the news that the company is working to raise $800 million through an offering of senior secured notes. Proceeds from the offering are earmarked to pay down the company's "B" and "C" tranches, causing the loan to jump into the 98 1/2- 99 1/4 range. At the end of January, the loan had been trading in the 96 1/2-97 1/2 context (LMW, 1/26). By that time, the paper had already risen considerably out of the low 70s where it was quoted in November.
Meanwhile, the European loan market is closely watching the recently restructured ALSTOM, which has been actively trading. This week, however, the bank debt was quoted a touch lower with its '06 senior bank debt trading around the 82 range and its '08 subordinated loans quoted off in the 70-73 range after the company announced its performance would be slightly below its previous forecast.
While ALSTOM said its orders over the next fiscal year could be about €15 billion over previous estimates, its operating margins are expected to come in from the 2-2.5% projections to about 1.9%, explained Emmanuelle Châtelain, an ALSTOM investor relations official. Investors are comforted by the company's book of orders, but they remain concerned that ALSTOM is sacrificing margins to win the orders, explained loan sources.
If these projections come to fruition, it is likely that the company will have to amend its EBITDA and consolidated net worth covenants. The company will be able to meet its total debt requirement of less than €4.754 billion, but it could miss its EBITDA requirement of €100 million and its consolidated net worth requirement of €1.4 billion, noted Châtelain. The company's largest banks include BNP Paribas, Société Générale. Crédit Lyonnais, Crédit Agricole, Natexis Banques Populaires, and CIC Securities.