Haynes files for Chapter 11, bonds ease; Parmalat better following meeting; asbestos debt better

By Paul Deckelman and Sara Rosenberg

New York, March 29 - Haynes International Inc.'s bonds were quoted slightly easier Monday, and trading without interest, after the Kokomo, Ind.-based producer of metal alloys announced that it had reached a restructuring agreement in principle with bondholders and its current equity investors and had filed a voluntary pre-packaged bankruptcy petition.

Elsewhere, the bonds of Parmalat Finanzaria SpA were seen several points higher in the wake of Friday's apparently successful initial meeting between the stricken Italian dairy products company's state-appointed turnaround administrator and its bondholders and other creditors.

On the bank loan front, debt of companies dealing with asbestos litigation was quoted, with USG Corp. and Owens Corning cited as prime examples.

Haynes announced that it had reached agreement with an ad hoc committee of holders of its senior notes and its present equity holders on the financial restructuring effort, and filed voluntary petitions for reorganization under Chapter 11 with the U.S. Bankruptcy Court in Indianapolis.

A trader in distressed bonds quoted the company's 11 5/8% notes scheduled to mature in September as trading around 66 bid, 68 offered post filing, and said that the bonds were now trading flat, or without accrued interest. Previously, he said, the notes had been seen around the 67 bid, 70 offered range, trading with accrued interest.

Under the terms of the restructuring agreement, the metal producer's noteholders will exchange their $140 million of 11 5/8% notes for 96% of the equity in the reorganized company (subject to dilution from a management equity plan) upon its emergence from Chapter 11.

Haynes is privately held and its current majority equity holder has agreed to the cancellation of its current equity interest in Haynes in exchange for 4% of the equity in the reorganized company upon emergence from Chapter 11 (see report on page one of this issue).

Another metals company in the news Monday was Weirton Steel Corp., whose unionized employees voted their approval of a proposed new contract with International Steel Group Inc., the stalking-horse bidder for most of the bankrupt Weirton, W.Va.-based steelmaker's assets. International Steel - a relatively new steel conglomerate formed by financier Wilbur Ross, who cobbled together assets of such other failed steelmakers as Bethlehem Steel Corp., LTV Corp. and Acme Metals, had asked the Independent Steelworkers' Union for cost concessions in line with those which other steelmakers have been seeking from their own unions. Huge pension obligations and other "legacy" costs were a major factor in driving Weirton, Bethlehem, LTV and other steelmakers into bankruptcy in recent years, and the remaining companies have made getting labor cost and pension cost relief a key part of their efforts to turn their situations around and avoid the same fate.

A trader said that Weirton's bonds continue to languish in a 40-45 context; the only thing he had seen all day was a 45 offering.

"I don't think [the labor deal] is any new news. It wasn't unexpected. I think everybody is waiting to see whether somebody else is going to bid."

ISG has offered to buy most of Weirton's assets for $158 million in cash, plus assumed debt, for a total value of about $255 million. Some senior bondholders believe that the Ross offer shortchanges them, claiming it gives them only a fraction of what their bonds are worth - by some estimates, as low as 20 cents on the dollar. They hired a steel industry expert earlier this month and are in the process of trying to make their own offer for Weirton, with Ross's proposal as the floor for possible valuations of the company. Those bondholders or any other potential rival bidders have until April 6 to submit their offers for the company to the bankruptcy court overseeing its restructuring.

Parmalat gains

Elsewhere, the trader quoted Parmalat's bonds "up a couple of points," with the 6 5/8% dollar-denominated notes due 2008 and the insolvent Italian dairy producer's various euro-denominated issues moving up to 13.5 bid, 14.5 offered from Friday levels around 11 bid, 12 offered.

On Friday, state-appointed turnaround administrator Enrico Bondi met with creditors - the first time that bondholders and representatives of international banks that had loaned the company money were brought into the loop along with the Italian banks, who have been there from the beginning of the insolvency late last year.

"People [apparently] liked that," the trader said of the Friday meeting, at which Bondi indicated that creditors will get equity for their debt. He did not give any specific level of recovery they might expect, but spoke only in general terms. An Italian newspaper last week speculated that the debtors could get as much as a 33% recovery on their investment, but the company quickly shot that figure down. There were other estimates that the recovery on Parmalat's over $17 billion of debt - including about $11 billion of bonds - might be considerably below that, a reality reflected by the current price of the bonds down in the low teens. Even with the gain Monday, creditors "still have a long way to go to get to par," the trader quipped.

Telewest up on buying

Another trader saw some movement in the bonds of Telewest plc, the troubled British-based broadband and cable operator.

He quoted its notes at 62.5 bid, 63.5 offered, up a point to a point-and-a-half on "better buyers."

He speculated that Telewest was getting a boost from the success so far of rival U.K. cabler NTL Inc., currently shopping a multi-currency £800 million equivalent offering of 10-year notes.

"The European roadshow was last week and the dollar-denominated roadshow starts this week. The conventional thinking is that when NTLI comes with this deal, some of the proceeds are eventually going to turn around and [be used to] buy Telewest."

However, Telewest's difficulties in expediting its restructuring continue to mount; the Financial Times reported that a minority of bondholders are threatening legal action over the rate of exchange being used to translate the sterling-denominated bonds they hold.

Fibermark firms further

Fibermark Inc.'s bonds continue to firm off their recent lows, although once again nobody could cite any fresh positive news out on the Brattleboro, Vt.-based manufacturer of specialty fiber materials for industry.

A trader saw the bonds having advanced to 53 bid, 54 offered, up from Friday's 51 bid, 53 offered and well up from last week's lows in the 46-47 context. At last report, the bonds were still being quoted trading with accrued interest.

USG, Owens Corning loans higher

On the bank debt front, asbestos-challenged building products maker USG Corp.'s paper was quoted at 94 bid, 96 offered, about a point higher on the day, and troubled insulation manufacturer Owens Corning's bank paper was quoted at 97.5 bid, 98.5 offered, about two points higher on the day, a trader said.

"Stocks are up," he explained. "They were up [Monday] and on Thursday. Friday was unchanged. There's a change in sentiment in the market. Nothing new on the asbestos front per se except that in some of these cases you get equity so people would say it's worth more now. "

USG is a Chicago-based manufacturer and distributor of building materials that filed for Chapter 11 on Jan. 25, 2001. Owens Corning is a Toledo, Ohio-based company that serves consumers and industrial customers with building materials systems and composites systems, which filed for Chapter 11 on Oct. 5, 2000. They were just two of among a number of companies, including such other high yield issuers as auto brake components producer Federal-Mogul Corp. and flooring maker Armstrong World Industries driven into the bankruptcy courts in recent years by a flood of real and threatened damage cases alleging 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.

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