Magazine article American Banker

Finova Soars after Offer Sweetened by Buffett JV

Magazine article American Banker

Finova Soars after Offer Sweetened by Buffett JV

Article excerpt

Investors in Finova Group got more good news over the weekend, with the troubled commercial lender announcing that it had reached a revised debt restructuring agreement with Berkadia LLC.

Finova's stock closed Monday up 25.8% on news that Berkadia LLC, a joint venture of Warren Buffett's Berkshire Hathaway Inc. and Leucadia National Corp., had offered a bailout of $8.1 billion, sweetening its previous offer of $6 billion.

The Scottsdale, Ariz.-based company's creditors committee endorsed the new proposal over a $7 billion plan offered a few weeks ago by General Electric Co. and Goldman Sachs Group that had sent Finova's stock up 19.7%.

The bidding between the two groups started in late February, when Finova's management approved Berkadia's $6 billion bailout offer after declining a $2 billion offer by GE Capital and Goldman.

With some $11 billion in debts to banks and bondholders and just $12. 4 billion of assets, Finova filed for Chapter 11 bankruptcy protection in March.

Equity analysts have ceased covering Finova, and on Monday fixed-income analysts were hesitant to comment on the effect of Berkadia's most recent proposal.

With the creditors' support, Finova management expects to present Berkadia's revised plan, which has not been approved by shareholders, at a bankruptcy court hearing scheduled for Wednesday.

"It's hard to argue that the most recent offer from Berkadia is not superior to their initial offer," said Matthew Burnell, a fixed income analyst at Merrill Lynch Global Securities. …

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