A $10 million piece of Hayes Lemmerz International's bank debt is believed to have traded in the 75 range last week. Dealers said the market for the auto parts maker slumped as investors look for pressure on the auto sector. Hayes Lemmerz is particularly susceptible because a large portion of the recovery coming to lenders when the company emerges from bankruptcy is said to be comprised of equity. The bank debt had been resting in the low 80s context for the last month.
Under the current plan of reorganization, lenders with roughly $790 million in claims will receive a pro rata portion of the pre-petition lender's payment amount and about 15 million shares in the reorganized company. While the plan of reorganization states that the recovery under the plan is 100%, the actual value is subjected to larger factors because a sizable portion of the recovery is made of equity. "It's a macro bet," said one trader, explaining the current play on Hayes Lemmerz depends largely on what the valuation would be. Calls to the company were not returned by press time.