The bank debt of Owens-Illinois traded last week in the 92-93 range and some traders expect it to climb higher as a restructured bank deal is backed by assets, improving banks' positions. The company is wrestling off asbestos litigation worries, as is Crown Cork & Seal, which saw bids for its bank debt rise with a new add-on the company recently inked.
Owens' new deal is helping in the secondary market. "The bank debt is cheap in comparison to the bonds," said a trader. "The banks are secured by assets, which is important because it puts them ahead," he said. Another dealer, believing that levels would go into the mid-90s range, said he has no idea why the bank debt is trading lower than that. "It's heavy," he said, referring to an imbalance in supply and demand for the paper. Owens Illinois' debt has gradually improved from the 88 range two weeks ago following a bank meeting. "The banks have realized they're getting a better deal than they expected. [Pricing is] LIBOR plus 75 on the current deal, which is pretty cheap."
Dealers add that the company's reputation as a solid business helps to offset any lingering asbestos litigation. Owens-Illinois, based in Ohio, is a glass manufacturer. "People acknowledge it's a solid business," a trader remarked. "The company performs well. It's just got this asbestos-liability debt related to a business line they're no longer in. It's not ongoing; they're not in a business that puts them at risk [to keep being sued.]"
Owens-Illinois has a $7 billion deal that is priced at 100 basis points over LIBOR. Bankers Trust Company, Bank of Nova Scotia, BancAmerica, and NationsBanc Montgomery Securities, according to Capital DATA Loanware. Crown Cork has a $2.5 billion revolving credit facility that is priced at 14 basis points over LIBOR. J.P. Morgan Chase, Societe Generale, and Bank America Business Credit lead the deal.