Chemtura

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After close today, Trian Fund Management, Nelson Peltz' asset management company, filed a 13D indicating the fund had amassed a 10 million (7.9%) share stake in FDO, and more importantly, expressed a vague, preliminary, non-binding and highly-contingent interest in acquiring discount retailer Family Dollar (closing regular hours at $44). As the proposed price indicated in the letter is $55-60, the shares are expectedly surging, meaning the letter alone resulted in nearly a 20% ($13) gain for Peltz 10 million share investment: $130 million for a few minutes worth of work: not bad. Yet is this anything more than a red herring? After all these kinds of fully contingent letters were all the rage during the bubble years, when funds would "express a purchase interest" with so many contingencies Arnold could drive his Hummer through all the "outs." As soon as the stock surged, the letter writer (and more often than not, the cabal of silent co-investors) would cash out, and slowly the buying interest would evaporate, with the price slowly dropping back to historical levels. In fact, for Trian this is not the first time - the company did an almost identical thing with Chemtura back in 2008, only to completely leave the company in March of 2009, months ahead of CEM's filing for bankruptcy (resulting in major losses for Trian). Which is why we urge readers to be very careful before chasing into FDO stock here: we are very concerned that this is nothing more than simply another attempt on behalf of Trian to stir up buying interest in which to sell its 10mm holdings with no real acquisition interest, since with all the non-binding clauses it is extremely difficult to take this letter seriously.

Is Bill Miller headed for retirement? Today's action in Legg Mason stock, which was down 10%, the most since May 2009, sure indicates investors may have had enough of the permabullish, pro-cyclical portfolio manager. The reason for the dramatic drop in stock price: accelerating outflows.

Spreads were significantly tighter this week with HY dramatically outperforming IG as tighteners outpaced wideners by over twelve-to-one. LCDX appeared to be the long credit vehicle of choice though as investors moved into the most senior part of the capital structure systemically. High-beta underperformed low-beta names (in large part due to CIT's impact on the tail risk names) as we saw IG, HVOL, and ExHVOL indices considerably outperform intrinsics and widening the skew almost 10bps in IG12.

The most anticipated and least shocking bankruptcy in the history of chemical companies has finally come. Got a $400 million DIP - not bad... those Citi blokes actually did their job. That's a much needed $6 million fee for the Cititanic.

Chemtura Corporation's U.S. Operations File Voluntary Chapter 11 Petitions to Facilitate Financial Restructuring

The news is likely not of the "good" kind

Ed Garden's former directorial chair is still warm, and already the company is rumored to be making advance preparations for a bankruptcy. According to Debtwire, the company is negotiating a DIP financing with existing revolver agent Citigroup (unfortunately most of Citi's DIP arranging bankers have recently departed the company). The likely DIP will total about $400 million, consisting of $100 million in new cash, and two separate roll ups, one of the $150 million AR facility, and another of the pre-petition revolver.

Nelson Peltz, who at one point had held high hopes for flame retardant plastics maker Chemtura, has had enough. His proxy on Chemtura's board, Ed Garden, a Vice Chairman of Peltz's Trian Fund Management, announced on Friday he was resigning from the Board of Directors.

Nelson Peltz, who at one point had held high hopes for flame retardant plastics maker Chemtura, has had enough. His proxy on Chemtura's board, Ed Garden, a Vice Chairman of Peltz's Trian Fund Management, announced on Friday he was resigning from the Board of Directors.

The market seems to have sealed the chemical company's fate, essentially saying the likelihood of bankruptcy is about 130% (give or take). Rumors are swirling that Chemtura's destitute bondholders have hired Akin Gump to help them salvage a little of what asset value the plastics maker might have left. With a full blown liquidity crisis and $375 million in notes due this July, the company at this point may at best have another 4 more months of life.

Surprising miss Kary did not break this one (maybe former Goldman restructuring honcho now K&E restructuring honcho Jaime Sprayregen finally "plugged" his leak), instead this piece of news comes compliments of Debtwire. According to "two sources familiar with the situation" Chemtura has hired Kirkland & Ellis as legal counsel and Lazard as financial advisor.

And y'all thought Lyondell is going to be the only spectacular chemical LBO bankruptcy. The list is long and focuses mostly on plastics makers: Ineos, Chemtura and Georgia Gulf. The third-largest producer of polypropylene sealed its fate in 2005 when it bought BP's Innovene unit for $9 billion. Net debt most recently was $9.7 billion, 4.3x more than LTM EBITDA according to CFO John Reece. Of course there is the matter of plummeting EBITDA... Doubt leverage will be there for long time.