Federal-Mogul Corp.'s bank debt ticked up in trading last week, with at least one $20 million piece said to have changed hands in the 781/279 range. The name is believed to have traded as high as the 791/2 level up from the 76-77 context, where it was moving two weeks ago. One trader said the debt instruments that lenders are expected to receive under the plan of reorganization will trade in the 80s. Another said the company is coming under pressure to emerge from bankruptcy.
There are concerns that Federal-Mogul will emerge from bankruptcy with an overleveraged balance sheet, according to a trader and a buysider. The company had been considering a $350 million equity investment from Citigroup Venture Capital Equity Partners (CVC), which would help reduce Federal-Mogul's long-term debt burden and increase liquidity. But the bankruptcy court denied the motion to authorize CVC's reimbursement of fees and expenses, as well as approve an exclusive negotiating period for the transaction.
The company is still negotiating the reorganization plan that was filed in March, said a Federal-Mogul spokesman, declining to comment on whether an equity injection is still an option. He said the company is working to emerge from bankruptcy free of asbestos liabilities and with a healthy balance sheet. Emergence is targeted for early-to-mid 2004.