WorldCom, HealthSouth weaken; Goodyear Tire cheered by contract ratification

By Carlise Newman

Chicago, Sept. 3 - WorldCom Inc. and HealthSouth Corp. were still the most actively traded names Thursday, but Goodyear Tire and Rubber Co. was active and nudged higher. Steel and asbestos were hot areas as well.

The news Wednesday that four more states plan to join the existing ones that have asked for permission to probe possible tax claims against WorldCom still proved to be having no impact on the troubled long-distance company. WorldCom's benchmark bonds closed at 29 5/8 bid, 30 1/8 offered, a drop of only ¼ of a point, a trader said.

"The tax audit is probably immaterial at this stage and the bankruptcy court will get rid of it," he said.

In recent sessions, traders have remarked on the resilience of WorldCom's bonds despite a string of bad news.

On Wednesday WorldCom's chief executive Bernie Ebbers pleaded not guilty in an Oklahoma court to 15 criminal charges, including securities fraud, that could bring him up to 10 years in jail. Ebbers was freed on $50,000 bond and the next hearing in his case is scheduled for October.

In other news, Goodyear Tire and Rubber Co. bonds were active and higher on the day, a trader said. He attributed the rise to the news that employees at a Wisconsin factory ratified a three-year contract with the company, becoming the first of the 14 local unions to do so.

The benchmark 7 7/8% notes due 2011 "went out 79½ bid, 81½ offered" on the news, a trader said, a rise of 1 point.

The Akron, Ohio tire company's revolver was quoted at 93½ bid, 94½ offered, unchanged from Wednesday.

HealthSouth Corp. bonds were still sliding Thursday. The 6 7/8% notes due 2005 were seen at 87 bid, 88 offered.

"The paper closed about 2 points lower, the biggest drop of the week for them," a trader said.

Last Thursday the Birmingham, Ala.-based healthcare company said its lending banks have waived a payment blockage, allowing past-due interest to be paid to the holders of the company's subordinated debt.

Elsewhere, steel and asbestos names appeared to be "hot" Thursday, according to a trader.

"The whole manufacturing sector was moving," he said.

AK Steel Inc.'s 7¾% notes due 2012 were seen at 81 bid, 83 offered, a rise of 1 point.

But WCI Steel Inc.'s 10% notes due 2004 were quoted in the 27 bid, 35 offered range, a trader said.

"The bonds went out at about a ½ point lower," he said.

Oregon Steel Inc.'s 10% notes due 2009 were quoted at 81 bid, 83 offered, unchanged from Wednesday.

Armstrong World Industries Inc. saw its bonds rise 1.5 points to 52 bid, 54 offered, a trader said.

On Monday, Armstrong said it obtained court approval to extend the voting deadline on its reorganization plan until Oct. 17 at 5 p.m. ET. The voting deadline was previously Sept. 22.

A confirmation hearing is scheduled for November 17.

The Lancaster, Pa.-based flooring manufacturer filed its fourth amended reorganization plan and disclosure statement on May 23. Under the amended plan, unsecured creditors will receive 59.5% of their allowed claims, compared to a 66.5% recovery stated in the original plan.

Meanwhile, Owens Corning's 7½% notes due 2005 were seen at 43 bid, 45 offered, a fall of 1¾ points, a trader said.

The Toledo-based building insulation maker has been sliding in recent weeks after it reported sharply lower second-quarter profits in mid-August, citing higher costs and charges for bankruptcy and restructuring. For the quarter, the company had a net income of $18 million compared with $36 million for the second quarter of 2002. Net sales fell to $1.239 billion from $1.285 billion.

Another manufacturing name, auto parts maker Collins & Aikman Products Inc., was seen weakening Thursday. Its 10¾% senior notes ended the day at 84½ bid, down from 87 bid, 89 offered Wednesday. The 11½% subordinated notes due 2006 ended the session at 72 bid, 74 offered, down from 751/2, 77½ offered the previous day. The bonds had traded as high as 77 bid Wednesday.

A trader attributed the loss to news out Thursday that Troy, Mich.-based Collins & Aikman lost a contract to supply components to DaimlerChrysler for its Jeep line, which is 2% of the company's revenue.

Elsewhere, U.K.-based Telewest Communication plc's 9 5/8% notes due 2006 were up 2½ points to 44½ bid, a trader said.

Lastly, Twinlab Corp.'s bonds had "a good run-up" Thursday. The bonds were seen at 61.5 bid, 64.5 offered, "well up from levels in the low 40s two weeks ago," a trader said.

He speculated that the recent appreciation of the bonds is a sign of investor confidence that "someone who knows what to do is taking over the company."

The Hauppage, N.Y.-based health supplement company filed for Chapter 11 bankruptcy protection Thursday and said it will sell its asset to Ideasphere Inc. for $65 million in cash, the assumption of $3.7 million of liabilities of the company and the assumption of the company's executory contracts and unexpired leases.

(Paul Deckelman contributed to this report)

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