Mercury Finance Co. suffered another setback Monday when Duff and Phelps Credit Rating Co. downgraded the subprime auto lender's senior debt.
The downgrading, to DD from CCC, came in response to the Lake Forest, Ill., company's failure Friday to pay off $15 million of medium-term, privately held notes.
Mercury's stock price fell more than 15%, to $2.75, as investors digested the Duff and Phelps action and worried about Mercury's ability to make a $50 million loan payment to BankAmerica Corp. by the end of the business day.
At press time, a source close to the company said Mercury was negotiating an extension with Bank of America's asset-based lending unit, which arranged the emergency loan Feb. 10 to help Mercury cover operating expenses.
Since the company's restructuring in late January, after a massive earnings restatement, Mercury has defaulted on more than $315 million of commercial debt.
The source said that Mercury has yet to get any serious offer for its insurance unit, Lyndon Insurance, which it officially put on the block last week.