Federal-Mogul bank debt up; Levi bonds continue rebound

By Paul Deckelman and Sara Rosenberg

New York, March 5 - Federal-Mogul Corp. was a big focus in the distressed bank loan market on Friday, with its debt moving higher by about three-quarters of a point following the company's filing of its disclosure statement.

Among bond investors, Levi Strauss & Co. remained an active name, as the company's notes, rebounding for most of the week from lows hit earlier on disappointing earnings, gained about another two points Friday.

Federal-Mogul's bank paper was seen trading in the 91.25-91.75 context and ended the day with the bid/offer seen at those levels, a trader said.

On Friday morning, Federal-Mogul filed its first amended reorganization plan along with an amended disclosure statement in the U.S. Bankruptcy Court in Wilmington, Del. The plan was developed by the company, the unsecured creditors committee and the asbestos claimants committee and has the support of High River LP, an affiliate of Carl Icahn, who is a creditor and a shareholder.

Under the plan, the Southfield, Mich. auto parts manufacturer will get a secured term loan agreement of $1.305 billion and issue $300 million of junior payment-in-kind notes with an 11-year maturity to repay nearly $2 billion in claims by pre-petition bank lenders. About $328 million will be either refinanced as part of the exit facilities or will become a senior tranche of a new $1.3 billion secured credit facility.

Holders of note claims and personal injury claims on account of asbestos exposure will receive the common stock of the reorganized company.

A hearing on the disclosure statement is scheduled for April 13-14.

Federal-Mogul was one of a number of U.S. industrial companies driven into the bankruptcy courts under an actual or anticipated flood of asbestos-related medical damage suits over the past several years; in most cases, the suits arose from the use of the fire-retardant material - now seen as a carcinogen - in various industrial applications, including automobile brakes in Federal-Mogul's case. Other companies in the same boat include insulation maker Owens-Corning, chemical manufacturer W.R. Grace, building materials producer USG Corp. and flooring maker Armstrong World Industries.

Armstrong steady at lower prices

Armstrong's corporate parent, Armstrong Holding, reported a sharply narrowed fourth quarter operating loss late Thursday, due to a lessening of asbestos-related charges: $6.1 million, well down from $2.49 billion a year earlier.

The Lancaster, Pa.-based flooring maker took $81 million of charges in 2003 related to asbestos liabilities, versus $2.5 billion in the fourth quarter of 2002.

Little movement was seen, however, in the company's bonds, which were seen remaining in a 53-55 context.

A market source said that the bonds had been "moving down from the high 50s for the last couple of weeks" before stabilizing at current levels.

Elsewhere, a distressed-debt bond trader saw a "pretty good drop" in Weirton Steel's notes, with its 10% bonds falling to the mid 20s versus prior levels in the lower 30s, a drop of between six and eight points, he said.

Levi notes gain

And he saw Levi Strauss' 12¼% notes due 2012 having risen to about 75 bid, from prior levels in the 72-73 range.

"People aren't concerned" about the disappointing numbers the San Francisco-based blue jeans maker had released on Monday, he said, noting that the bonds had crept from their lows around 68 to the current 75 - above the levels they had been holding when the numbers were released.

A market source at another desk saw Levi's 11 5/8% notes due 2008 move up to 76 bid from 73.75 on Thursday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.