Werner sees bid jump to 95 on follow through from Thursday's bondholder call

By Sara Rosenberg

New York, Jan. 9 - Werner Holding Co.'s bank debt headed higher Friday by about three points on the bid side to mid-90 levels essentially on follow through from Thursday's bondholder conference call, according to market sources.

The paper was quoted at 95 bid, 96 offered on Friday, according to a trader, who placed the bank debt at 92 bid, 94 offered at opening.

"It's from yesterday," the trader said explaining that the run up is still a reaction from Thursday morning's conference call.

"There are not a lot of sellers," he added.

On Thursday, the bank debt had been quoted all over the place with levels being cited anywhere from 90 bid to 93½ bid depending on which trader was asked. According to one trader, the paper was seen at 90 bid, 92 offered, softer on the day. While a second trader placed the paper at 93½ bid, 95½ offered, up from an opening level of 92 bid, 93 offered. And, a third trader placed the paper at 92 bid, 93 offered, up from an opening level of 91 bid, 93 offered.

During the bondholder conference call the company discussed why the choice was made to terminate the contract with Home Depot and enter into an exclusive agreement with Lowe's Cos. Inc.

Furthermore, company officials stated in the call that they are analyzing an operational restructuring to reduce costs to align with reduced sales volume. To meet this goal the company is looking to reduce manufacturing and distribution capacity and cut the overhead expense structure in the near term.

Toward the end of December, Werner revealed that it would stop supplying Home Depot with Werner products. The Greenville, Pa., ladder company also announced that it had entered into a long-term agreement with Lowe's under which Lowe's will be the exclusive source for Werner's climbing equipment.

Sales of all products to The Home Depot, including extension ladders, stepladders, attic ladders and assorted accessories, accounted for $161.3 million or 31% of the company's total net sales in 2002 and $100.1 million or 27% of total net sales during the nine months ended Sept. 30.

In response to this news the company's bank debt plummeted to around 86 bid but then managed to dust itself off, rebounding to the 90 bid, 91 offered level. Prior to the announcement, the bank debt was quoted around 94 bid, 95 offered.

It was also revealed in late December, during a private lender call, that the company anticipated having to amend its credit facility since without Home Depot as a client EBITDA would probably fall short of the credit agreement requirement, and other financial covenants could potentially be missed as well, a market source previously told Prospect News.

A meeting for the existing bank paper is expected to take place in mid first-quarter 2004 to go over possible amendments and discuss the company's plans.

Overall, the secondary bank loan market was "kind of quiet" on Friday, according to a trader, with nothing really notable trading or even stronger on the day. The inactivity left some feeling disappointed after what looked like a very promising start to the New Year at the beginning of the week.

On both Monday and Tuesday the secondary market was said to be ablaze with activity, and everything was quoted higher for no specific reason other than market technicals. Some names specifically mentioned by traders included Wyndham International Inc., Calpine Corp., Reliant Resources Inc., Conseco Inc., Adelphia Communications Corp.'s subsidiary paper, Allied Waste Industries Inc. and Nextel Communications Inc.

However, beginning on Wednesday things started to slow down and some paper even started to come in a little bit during the cooling off period.

"It's been a little bit of a let down after the way the week started," a trader said. "It's kind of quiet out there today."

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