Aurora Foods' bank debt slumped last week after the company was rumored to have told banks that it would be unable to make a July interest payment on its bonds. The company also has not yet completed asset sales, which the market originally anticipated in the first half of this year. The loan slipped, trading into the 89-91 context from the 92-94 range, according to dealers. Late last week, the market for the paper was quoted wide in the 89-931/2 range. A trader predicted that Aurora would run into trouble if it could not make its interest payment and could not complete the asset sales, but he suggested a reorganization would be good for the company. "The bonds are underwater, but people think that the bank debt is covered," said another trader.
A company spokesman said Aurora is still pursuing the sale of several of its frozen foods businesses, but that nothing had been announced at this time. He declined to comment on whether or not the company will miss its July interest payment or if it had notified investors that it might.
In conjunction with an amendment that Aurora made to its credit facility in February, the company must meet certain asset sale targets. If the company does not complete $100 million in asset sales by today, it will be charged an excess leverage fee of 3.5% of the aggregate amount of the outstanding amount on its credit facility at the time the amendment was completed, which would equal roughly $12 million. The company must also receive an additional $125 million by Sept. 30. If Aurora is unable to make the asset sales, the excess leverage fee would accrue until the company receives an equity infusion or completes an asset sale, the company spokesman noted. The fee will be waived if the company can raise $325 million by September, he added.