Allegheny Energy Supply’s second-lien loan hit par range late last week and is now trading in the 100-100 3/8 range. The recent uptick comes ahead of a Dec. 31, $250 million amortization payment on the company’s first-lien loan obligation. With a large part of the company’s $420 million first-lien loan being taken out, second-lien lenders “have a package that’s a little more secure,” noted one trader. Allegheny Energy has been engaging in efforts to reduce costs and strengthen its balance sheet. Calls to Jeffrey Serkes, senior v.p. and cfo, were not returned by press time.
European loan sources described the uncertainty surrounding the global consumer products company Parmalat as a “wait-and-see” situation. While no bank debt levels are quoted, the company’s bonds and credit default swaps have been changing hands actively at distressed levels. The company’s bank debt is largely comprised of relationship lenders and bilateral lines, said market sources. But whether or not lenders would ultimately decide to sell down some of their exposure remains to be seen, said one dealer. “Dealers are out there trying to get their hands around it,” a buysider noted.
After Standard & Poor’s downgraded Parmalat’s main operating subsidiary from A3 to B to C over the course of this week, the rating agency hosted a conference call during which Hughes De La Presle, an S&P analyst, explained that the decision to downgrade the company came with the clear and present risk of default. He said key drivers of the decision revolve around Parmalat’s access to liquidity and ability to service debt maturing before year’s end. Liquidity is partly dependent on the support of the company’s banks. “Currently Parmalat has approximately EUR1.2 billion of drawn uncommitted bank debt, which is provided essentially by Italian banks. In the current turmoil we need to make sure that banks will not withdraw their support,” said De La Presle. Company officials could not be reached by press time.