DDJ Capital, a Wellesley, Mass.-based distressed debt investor, is believed to have bought up the majority of SLI's bank debt in the 15 context. The trades, estimated to be for about $200 million worth of paper, are rumored to have been brokered by FleetBoston Financial, which led the credit. Judy Mencher, co-founder and principal of DDJ, referred calls to a spokeswoman, who cited the firm's policy of not commenting on its investments or strategies. Calls to Fleet officials and Robert Mancini, SLI cfo, were not returned by press time.
SLI is currently wading through a Chapter 11 bankruptcy process and has $365 million in pre-petition bank debt. DDJ's move on $200 million of that debt puts it in a power position. "They are practically buying the company," said one market player. The lighting manufacturer filed for bankruptcy on Sept. 9 after the acquisitions it completed failed to be as profitable as anticipated and its liquidity position worsened due to larger economic factors. In the second quarter of 2002, the company violated some of the covenants under its credit agreements and defaulted on a principal payment obligation on July 1.
Last month, SLI received the right to extend the exclusive period during which it could file a plan of reorganization until April 23. Initially, lenders including DDJ, Cerberus Capital Management and J.P. Morgan objected to that motion. The lenders withdrew their objection based on an agreement whereby they could conduct due diligence to determine whether or not they wanted to enter a competing bid on the company, explained Brian Whittman, a director at Alvarez & Marsal, the restructuring firm working with SLI.
SLI is in the process of selling off its two business segments, miniature lighting and general lighting. Last week, the company entered into definitive agreements providing for the sale of the miniature lighting division to an affiliate of M Capital for approximately $100 million and its general lighting business to Frank Ward, SLI's chairman of the board and ceo, for $123 million. Under this scenario, the bank debt lenders would receive about 20 cents on the dollar, noted one market player. Two weeks ago, SLI secured a $35 million replacement debtor-in-possession facility provided by affiliates of M Capital after a provision in the its former Fleet-led DIP reduced the commitments down to $15 million, explained Whittman.