More than $100 million of Warnaco Group's bank debt traded in the 30-32 range last Wednesday after the company told investors it is pursuing a stand-alone plan rather than seeking a merger or acquisition. The trading that followed was likely the work of arbitrage players getting out of the name after buying it in hopes of a quick M&A deal, said Jim Fogarty, company cfo. "We are not in liquidation. We have been running an M&A process and putting together a stand-alone plan," said Fogarty. But as the bankrupt company focuses on maximizing value, the best option is a stand-alone plan, he said.
"Keeping all business units together is a viable option," Fogarty noted, citing a strong liquidity position and solid earnings. The company is still considering its options, but restrictions from its licensors complicate the M&A process, he said. The company expects to have the term sheet by mid-June, a plan and disclosure statement by the end of July, and anticipates an emergence from bankruptcy by the end of this year, Fogarty explained.
The market for the paper had dropped into the 28-30 level by last Thursday, but one trader said the levels should rise again. In addition, a rumor that Goldman Sachs was trading paper it had picked up from a $140 million Japanese bank auction in mid May circulated through the market. Several traders, however, said that they believed the paper that was traded on Wednesday did not come from a Goldman position.