Maxwell report knocks debt price

THE price of the pounds 1.5bn of Maxwell Communication Corporation loans traded on the secondary debt market has taken a downward lurch following the publication of the reorganisation plans put together by MCC's administrators Price Waterhouse.

Directly after the publication of the 200-page document, prices of MCC debt tumbled from 44 per cent of face value, where there had recently been a dollars 60m sale by Bank of America, to around 30 per cent.

The prices recovered to around 40 per cent by Friday, though one of the main dealers in the market said: 'There is no depth to the interest at the moment. If someone wanted to sell a large chunk of debt, they'd be lucky to get more than 35 per cent.'

Potential investors were concerned about bearish forecasts of the amount Price Waterhouse expects to raise from the sale of MCC's main US publishing businesses, Macmillan and Official Airline Guides.

In the document it estimates that proceeds from the sale of these businesses will be between dollars 680m and dollars 1.1bn, which is in line with its previous statements.

However, US investors had expected a higher estimate, particularly since there has been a great deal of interest in the businesses from sources as diverse as the Anglo-Dutch publisher Reed Elsevier, the Texan billionaire Robert M Bass and General Cinema, the food-to-entertainment group that once built up a large stake in Cadbury-Schweppes.

The estimates imply that banks will get between 30p and 45p in the pound back on their loans.

The secondary market in MCC debt has been quite active, and Price Waterhouse has estimated that more than a third of the loans have been sold by the original lenders.

Morgan Grenfell has jumped from fourth to first place in the league table of dealers in the dollars 500bn secondary market in developing country debt. According to Risk Magazine, its dealings last year trebled from dollars 22bn to dollars 67.8bn while the market, hitherto the preserve of US investment banks, at least doubled in size in 1992.