The bank debt for Mayflower Corp. came under intense pressure this week as the company announced that it was insolvent and was appointing administrators. Earlier this week, the company announced that negotiations with its lenders were likely to fail. As a result, the bank debt levels plummeted from the 40s into the high teens to the low 20s level over the course of the week. The company's Mayflower Vehicle Systems, TransBus International, and its management services subsidiaries will be a part of the insolvency proceedings. Mayflower's insolvency comes only days after the company disclosed a management shakeup and the discovery of accounting irregularities at its TransBus International unit. At first, distressed loan sources were divided on where the bank loan paper should be valued, with some quoting it as low as the 25-35 range and others as high as the 30-40 context.
Mayflower only recently renegotiated its credit facility in December, putting in place a GBP160 million loan led by Credit Suisse First Boston and The Royal Bank of Scotland. But the company continued negotiations with its lenders who had agreed to provide additional facilities to Mayflower while the parties concluded their negotiations. The company had been in negotiations over the GBP160 million facility as well as other facilities, noted a Mayflower spokeswoman. But, "The price ticket to bail this [company] out is too expensive," said one buysider.
Mayflower bank debt has already been softer over the last month after the company warned that its year-end results were likely to miss market expectations. At that time, the bank debt had been trading in the low-to-mid 50s, but market participants believed that it would settle well in the 40s (LMW, 3/15).
Meanwhile, a piece of Henlys Group bank debt was auctioned off in the 72-74 range early this week, leaving some market players to comment that the trading levels for the loan were too rich. Henlys has a 30% shareholder stake in TransBus, which could expose Henlys to the trouble at Mayflower. "Its holding in TransBus will be worthless if Mayflower filed," said one buysider. As a result of Mayflowers administration, Henlys is making a full provision against the TransBus investment, according to a company statement. Henlys also noted that its lenders remain supportive. It could not be determined if the bank debt for Henlys slipped on the news. Calls to Bill Gillespie, Henlys finance director, were not returned by press time.