A $45 million auction of Crown Cork & Seal bank debt went off at about 88 this week after the company was said to have received an extension on a $144 million term loan set to mature on Aug. 4. An original lender was rumored to have sold the paper, taking the opportunity to reduce its exposure to the company's bank debt on the good news. One trader suggested that the buyer was looking to profit from a relative-value play. "You could sell the '02 bonds at 99 and buy the bank debt at 88," he added.
Crown Cork took a hit last week as news was released that the company would be unable to complete the spin-off of Constar International because of a weak equity market. Traders said the bank debt sunk as much as seven points as proceeds from the IPO were earmarked to reduce debt to $4 billion by year's end (LMW, 8/5). Calls to Timothy Donahue, senior v.p. of finance, were not returned by press time.