The bank debt for bankrupt Outsourcing Solutions charged up nearly 10 points last week as the confirmation hearing on the company's exit plan approaches. Market players said the name traded as high as the 56-57 level last week after being quoted by LoanX in the mid 40s two weeks ago. One trader noted that it was hard to quantify the uptick because it could not be determined if trades were recently completed in the 40s range.
The confirmation hearing that will wind up Outsourcing Solutions' bankruptcy proceedings is set to begin tomorrow. The company has already received court approval for its disclosure statement. In addition, senior secured lenders holding almost 77% of bank debt claims have committed their support and votes in favor of the restructuring proposal under a lock-up agreement. Credit Suisse First Boston holds the lead role on the company's credit with Fleet National Bank as the administrative agent and Harris Trust & Savings Bank as the documentation agent.
The senior lenders have $475 million in bank debt claims, which they have agreed to convert into $175 million in senior secured notes and shares in the newly reorganized company. The bank debt lenders are slated to receive 100% of the equity subject to dilution by 20% from a preferred stock instrument purchased by Madison Dearborn Partners for $10 million and by 7.5% for a management program. In exchange, the banks have agreed to forgive $22 million against the debtor-in-possession facility or provide the company with the same amount in cash. The banks will also arrange a supplemental $10 million, 364-day revolver.
Merrill Lynch will provide the company with $90 million of non-recourse conduit financing, which will support the company's purchase of portfolio assets--a portfolio of delinquent receivables. This is the cornerstone of the reorganization plan, said a source familiar with the plan. Calls to Gary Weller, corporate executive v.p. and cfo of Outsourcing Solutions, were referred to a spokesman, who confirmed the hearing date but declined to comment on the bank debt levels. Timothy Hurd, a managing director at Madison Dearborn and director for Outsourcing Solutions, could not be reached.