The market seems to be in a wait-and-see mode on Owens-Illinois Inc.'s restructured deal, signed last week after the last of the 81-member bank group got on board. The term loan is being offered in the Street at 98.5, but there were no trades. "The question is, where's the bid?" observed a dealer.
Market players stressed that with bondholders filing suit against Owens Illinois and Deutsche Bank, there are still too many legal questions to jump on the bank debt. "It looks like the banks are home free, but never say never," one remarked.
Still, on the surface the new deal is, "good for the bank debt, bad for the bond holders," said a dealer, noting how the bank debt is now in front of the bonds when they were once pari passu. "They were all of equal ranking during the bankruptcy," said a market watcher. "The language in the bond indenture is clear, that the holding company couldn't pledge assets to the bank group without the consent of the bondholders. What it didn't say was if the subsidiaries could pledge the assets. The banks refinanced so the subsidiaries are the borrowers and not the holding company. The bondholders now feel they've been hoodwinked," said the dealer. A spokesman for Owens Illinois did not return calls.
On April 11Murray Capital Management filed a lawsuit against Owens Illinois and Deutsche Bank. Murray Capital charges that Deutsche caused Owens to "breach its contractual obligations to Murray Capital (which) has suffered damages as a direct result of Deutsche's improper conduct."