A piece as large as $20 million of Finova Group's paper traded at 80 last Wednesday as dealers are riding in the wake of news that General Electric Capital Corp. and Goldman Sachs are angling to take control of the company. The trade is in line with levels two weeks ago in which bids for Finova's paper jumped 10 points. One dealer said last week that the bond levels have jumped around from 73 to 80. Another remarked that the paper trades continuously and it's hard to gauge whether any market speculation is fueling trades. "There's probably something going on that we all don't know about," said a dealer familiar with the credit. He declined to elaborate.
A spokeswoman at Finova and a spokeswoman at Goldman did not return calls. A spokesman at GE Capital declined comment. The Scottsdale, Ariz.-based company offers commercial financing to small and mid-sized companies. GE Capital and Goldman are looking to purchase $2 billion from the existing Finova shareholders at approximately 75 cents on the dollar. The firms would then take over Finova's assets and manage them to achieve a high return to creditors. This would take place amidst a bankruptcy reorganization under Chapter 11.
One market player was skeptical of the deal. "It will probably fall through. There's just too many banks in the credit," he said. "Goldman and GECC are just interested in managing the assets and making money off the banks. The banks are better off not doing it." He cited the earlier fallout on a deal with Leucadia National Corp. and said the newest proposal holds no greater promise of coming through. Yet a source at one of the principal parties said discussions are in the works. "We have a very reasonable and good proposal, even though we have a long way to go," he said. "The deal is certainly not dead."