Bondholders Await Plastics Sale

As Viskase Cos.'s bondholders eagerly await news of the sale of the company's plastics and shrink film business, what the price tag will be for the division remains a mystery.

What wasn't so mysterious, though, was the impact the sale price would likely have on the company's bonds. "If they don't sell the film business for good value, the bonds could drop to 30," said a bondholder. "If a sale is north of $200 million, the bonds could go to 70," he added. The noteholder, who owns "more than a couple of million dollars worth of the senior unsecured notes," bought in last month at the 10.25% notes' current level of 58/60, he said.

"I want to know what the business will go for, how much will be left in the coffers [after Viskase pays off its bank debt] and what the cash flow of the business left is," remarked the bondholder, who requested anonymity.

In addition to the roughly $70 million tranche of senior unsecured bonds, callable on Dec. 1, 2001, Viskase has a $151 million tranche of 12% senior secured bonds. The company also has $97.5 million worth of capital lease obligations.

First in line to reap the benefits of the sub sale, though, is Viskase's $90 million in bank debt, said Chief Financial Officer Gordon Donovan.

Chicago-based Viskase, whose market cap has dwindled to $25 million and whose stock was delisted by Nasdaq last Wednesday, also manufactures cellulose casings for meat products.

Last week, Donovan said the divestiture was in line with the mid-year sale closing it anticipated when it made the Jan. 17 announcement, he said.

"There's been a broad range of interest" from buyers, Donovan said, declining to elaborate. While he said the film division accounts for 40% of the company's business and has been a solid operation, he steadfastly refused to attach an EBITDA figure to the unit.

Therein lies the problem for bondholders and others attempting to figure out what the sub could see in a takeout. For the third quarter, Viskase posted EBITDA of $15 million on revenue of $96 million, compared to year-earlier EBITDA of $13.5 million on revenue of $102.6 million. However, Donovan declined to say what percentage of the company's overall EBITDA was attributable to the unit on the block.

Another lingering situation that could provide a much-needed windfall for Viskase is the $165 million a jury awarded the company in its long-standing patent infringement lawsuit against American National Can Group Inc. Chicago-based American, majority owned by Pechiney SA, is appealing the award ruling, which came down last July 6.

William Francois, general counsel for American, could not be reached to comment on the status of the litigation.