Quotes for Warnaco Group's bank debt tumbled 10 points into the mid-30s late last week following an announcement of a bigger than expected earnings loss. Traders seemed to be awaiting a conference call scheduled as LMW went to press to take action. "The banks are so shellshocked that they're not ready to take a market price and go."
Stocks had plummeted to $1.55 from $2.65 the day after Warnaco made the announcement. A market watcher, who had tried to buy the debt, found there weren't any sellers. "If they're trying to renegotiate an amendment, it's unlikely anyone will sell. It's much neater [to do a deal] once the amendment is closed," he said. By late last Thursday dealers were talking of a rumored trade but were skeptical. "People are trying to talk it down," said one. Warnaco, based in New York City, markets underwear to department and specialty stores. A spokesman for the company did not return calls.
Warnaco recently settled a legal tangle with Calvin Klein and was said to be on the upswing. But the latest announcement by the company has reinforced some dealers' uncertainty. "It's very volatile. There's a lot of clouds around what's going on," said a trader, adding that the company's announcement of "significant" losses is vague. Dealers were awaiting the outcome of a conference call the company was having on last Friday.
Early this year there was a failed auction for Warnaco, with bids falling below the 65 asking price (LMW, 1/14). Dealers cited the downtrodden textile industry and Calvin Klein's lawsuit against Warnaco, which alleged trademark violation. Warnaco has a $1 billion credit facility that breaks down into two tranches and expires in 2004. Bank of Nova Scotia, Société Générale, Citibank, and Commerzbank are the mandated arrangers, according to Capital DATA Loanware. Pricing is linked to the debt rating.