Asbestos bonds, loans seen firmer; Dan River better after filing; aaiPharma bounces

By Paul Deckelman and Sara Rosenberg

New York, April 1 - Bank debt and bonds of companies with asbestos-related legal exposure were seen better in Thursday's trading - some of it pretty active, according to traders, on market speculation that a legislative solution to the asbestos liability problem might be possible.

Elsewhere, the bonds of Dan River Inc. were seen having improved a few points following the textile maker's Wednesday Chapter 11 filing, although they are now trading without interest.

And beleaguered pharmaceuticals maker aaiPharma Inc.'s bonds continued to ride a roller-coaster, firming smartly after having dipped down into the mid-70s in Wednesday's session.

Once again asbestos names were up and actively trading on Thursday, market participants said, with Owens Corning, Armstrong World Industries Inc. and Federal-Mogul Corp. bank debt all trading higher by about a point.

No one was able to really pinpoint a reason behind the activity, but they speculated that it could have something to do with "legislation guessing" and equities, the view of at least one market source.

Owens Corning bank paper traded up at 69.5 and ended the day quoted around 69 bid, 70 offered. Armstrong's bank debt traded up at 55.5 and ended the day quoted at around 55 bid, 56 offered. Lastly, Federal-Mogul traded up at 90, and ended the day quoted around 90 bid, 91 offered, according to a trader.

A second trader said that Federal-Mogul traded above 90 during the day.

In the bond-trading pits, a trader in distressed notes also observed most of the asbestos companies' bonds up a point, although he saw Federal-Mogul's paper actually unchanged around 26 bid.

He did see Armstrong's bonds at 55 bid, 56 offered, up a point on the session, and pegged Owens-Corning's bonds likewise a point better, at 44 bid, 46 offered

Toledo, Ohio-based Owens Corning, a maker of insulation and other building materials, filed for Chapter 11 on Oct. 5, 2000. Federal-Mogul is a Southfield, Mich. Maker of auto-parts - including asbestos-lined brake shores - that filed for Chapter 11 on Oct. 1, 2001. Armstrong is a Lancaster, Pa. flooring, ceiling and cabinet company that filed for Chapter 11 on Dec. 6, 2000.

They were just a few among a number of U.S. companies driven into the bankruptcy courts in recent years by a flood of real and threatened damage cases that alleged that their plaintiffs suffered ill health effects after having been exposed to asbestos. The material was widely used for fireproofing and other industrial applications for decades, until it was recognized as a carcinogen in the 1970s and 1980s.

With those names still languishing in bankruptcy, then, why the firming trend?

According to some market sources, the feeling apparently is that as equity in these companies increase in value, some debt investors feel that the bank debt or the bonds should increase in value as well, since in some of the reorganization cases, lenders and other creditors stand to get equity in the reorganized firms.

Dan River rises

Elsewhere, a trader quoted Dan River's 12¾% notes due 2009 - which had traded down to about the 23 level on Wednesday following the company's bankruptcy filing from prior levels around 28 - as having pushed back up to the 25.5 bid, 26.5 offered level, "but they're still missing their coupon," as the company's notes began trading flat, or without accrued interest, upon the filing.

The Danville, Va.-based textile maker is the latest U.S. textile company to seek reorganization, driven into bankruptcy by an inability to keep up with low-cost foreign textile producers; others who have gone that same route include WestPoint Stevens Corp., Pillowtex Corp., Cone Mills Corp. and Burlington Industries Inc.

Weirton rises

Among other bankrupt names seen trading around on Thursday, Weirton Steel Corp.'s notes were being quoted having moved up to 38 bid from previous levels around 35 bid, 38 offered; there was no fresh news out on the Weirton, W.Va.-based steel maker, which has agreed to sell most of its assets to financier Wibur Ross's International Steel Group Inc. for $258 million, including some debt assumption; dissident bondholders hope to put together a rival bid ahead of an April 6 deadline for submitting all offers to the bankruptcy court.

A trader saw Fleming Cos.' bonds a point firmer, 13 bid, 14 offered; and newly bankrupt Fibermark Inc.'s 10¾% notes due 2011 dipped a point to 55 bid, 56 offered.

Air Canada unchanged despite pension troubles

And Air Canada's bonds were seen pretty much unchanged around 35 bid; the Canadian carrier thought that it had reached a deal with its unions on pension reform, that would allow a scheduled investment by financier Victor Li's Trinity Time Investments to pump badly needed equity into the insolvent airline - only to have the deal repudiated by the national head of the Canadian union that represents the company's mechanics, as part of an intramural feud with the local that negotiated what had seemed to be an acceptable deal. Li has threatened to walk away from his plan to invest in the airline if the pension contribution system is not overhauled.

Adelphia Communications Corp. unit Century Communications Corp.'s bank debt was quoted up about a quarter to a half a point over the last day or so, with the New Century paper seen at 95 bid, 95.5 offered and the Old Century paper seen at 96 bid, 96.75 offered, according to a trader, who said that he didn't see much of the bank debt trade on Thursday.

Another trader, however, saw "a lot of [Adelphia] was trading" on Thursday as there seemed "to be a big buyer out there."

Among companies not in bankruptcy, troubled supermarket operator Winn-Dixie Stores Inc.'s 8 7/8% notes were a point better at 90 bid, 92 offered, while its 8.18% notes were two points up, at 80 bid, 82 offered.

aiiPharma solid

And aaiPharma's 11% notes due 2010, - which have been gyrating around all week on the Wilmington, N.C.-based drugmaker's ups and downs - bounced off the lows at which they ended Wednesday and firm solidly Thursday, on news that it had lined up a $40 million short-term credit revolver, giving it some badly needed liquidity.

One trader quoted the notes bid at 87.5 on Thursday, well up from their Wednesday close around 80 bid.

Several others saw them bouncing as high as 90 bid, 92 offered during the session.

"Some people were trading them flat [without accrued interest] on Wednesday and some were trading them with accrued," a trader said, after the company's Wednesday announcement that because of its delay in filing its 10-K annual report with the Securities and Exchange Commission, it was in default on its $100 million credit revolver and its lenders might not allow it to make the scheduled April 1 bond payment.

He said either way, "there wasn't very much interest" - with a maturity of April 1, 2010, "the interest was pretty well cleaned up."

With access to its current credit revolver blocked, the new revolver is welcome news for the company, which is wrestling with problems on several fronts, stemming from its recent revelations of "irregular" sales figures for two of its products, prompting an internal investigation that has delayed filing the results.

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