Bank debt levels for Fleming Companies tumbled last week after the company drew down a portion of its $475 million revolver, postponed a meeting with banks and inched closer to an important deadline. The company's "B" loan traded in the 94-95 context on Wednesday, but by Thursday afternoon the market had sunk to the 85-87 range and some trades reportedly took place at those levels. Some dealers noted that a trade in the 85 context was a bit aggressive and subsequently the market for the "B" loan stood in the 85-90 context. The bank meeting was postponed from last Tuesday to last Friday, after Loan Market Week went to press. Repeated calls to Fleming's financial officials, including Mark Shapiro, senior v.p. of finance and operations control, and a spokesperson were not returned by press time.
As the end of the month nears, the company approaches a few situations that could potentially trigger a default: a deadline to complete asset sales as required by the company's credit agreement and a bond interest payment that lenders might force the company to miss, explained market players. In conjunction with an amendment, Fleming committed to completing some asset sales that are pegged to pay down the "B" piece by March 31. These assets sales are now expected to be delayed. Due to the uncertainty concerning whether the company will have to restate its financials as a result of investigations into its accounting and trade practices, there is concern that the bank holders, not wanting any value to slip out to the bondholders, will block a $17.7 million April 1 interest payment.
Investors are hoping that Fleming's trade creditors will not get spooked as negative news and uncertainty engulfs the company. "Looking at the events over the last week, one would think that the vendors are more critically assessing whether or not to restrict credit terms," said Robert Goch, a fixed income analyst at Miller Tabak Roberts Securities.
On the plus side, the company is said to be still progressing toward an asset-based deal and after recently completed asset sales, it has roughly $250 million left on its "B" tranche, noted one dealer. The company's revolver was quoted in the 80-85 context. But no trades were reported, as the revolver is not supported by proceeds from future asset sales. The food distributor's 101/8% notes also tumbled falling about 15 points since last Monday, trading as low as the 38 level.