Traders said HSBC bought a $25 million piece of Federal-Mogul's $1.75 billion outstanding bank debt from Bank of America in the 67-68 context last Monday--a few points higher than the mid-60 level the market saw last month for the credit. Last month, investors were reportedly pulling back cautiously, anticipating a Chapter 11 filing by the company, dealers said. Since last month, investors are getting more comfortable with the idea that the company may not file for Chapter 11 immediately as it hasn't yet made a move after much speculation last quarter. Calls to James Fisher, spokesman at Federal-Mogul, were not returned by press time. Calls to officials at HSBC were not returned by press time.
Some dealers still expect a move toward Chapter 11 to happen before the end of the year as the company is close to violating a covenant on its senior secured bank debt. Lisa Jenkins, analyst at Standard & Poor's, lowered the company's ratings at the end of last month as the company has been receiving an increased number of asbestos claims that could lead to increased financial stress and potential covenant violations, she said.