Owens Corning bank debt retreats from gains; Pegasus seen getting a bounce

By Paul Deckelman and Sara Rosenberg

New York, May 19 - Owens Corning's bank debt came in quite a bit during market hours Wednesday, with the Toledo, Ohio-based insulation maker's paper quoted at 74 bid, 75 offered compared to Tuesday's levels of 76 bid, 77 offered, according to a trader.

The paper had rallied by some seven or eight points on Monday to 75.5 bid, 76.5 offered, on news of the removal of Judge Alfred Wolin from overseeing the company's Chapter 11 asbestos-related case after creditors complained he was not impartial.

"Maybe it got ahead of itself," the trader said of the Owens Corning paper. "There's still a big fight ahead of it."

Other asbestos names had also rallied this week, including W.R. Grace & Co., a Columbia, Md.-based specialty chemicals and materials provider, and USG Corp., a Chicago-based building materials company, since Wolin had been removed for their cases as well.

Also rallying had been Armstrong World Industries Inc., a Lancaster, Pa. floor, ceilings and cabinet company. There will be a hearing to determine whether Wolin will continue judging that case.

W.R. Grace's bank debt was quoted at 78 bid, 82 offered on Wednesday, unchanged from previous levels; USG was quoted at 93.5 bid, 94.5 offered, also unchanged; and Armstrong was quoted at 52 bid, 54 offered, lower on the bidside when compared to Tuesday's quotes of 53 bid, 54 offered, according to the trader.

Asked why Owens Corning took a decent hit during market hours while the other affected asbestos companies were essentially unchanged the trader said: "Owens Corning had the biggest run-up. It was up about eight points. So now it's backed off."

Interestingly, another asbestos-related issuer, Federal-Mogul Corp., which was basically unaffected by the Wolin news since the judge will continue to preside over its Chapter 11 case, was up half a point on the day to 90.5 bid, 91.5 offered in reaction to an overall better market tone.

Southfield, Mich.-based auto parts maker Federal-Mogul's junk bonds were meantime heard to have firmed to 27 bid from 26.25 previously, while Armstrong World Industries' bonds were a quarter-point better at 53, and Owens Corning's notes were likewise up a quarter of a point at 41.25

Reliant Energy gains on sale

Elsewhere, Reliant Energy Inc.'s bank debt and bonds headed higher in an improved secondary environment as the electric company's latest asset sale and debt reduction announcement sparked enthusiasm among investors.

The company's revolver was quoted at 94.25 bid, 95.25 offered, up about a point on the day, its term loan A was seen trading with a 98 handle and the term loan B was quoted at 98.375 bid, 99 offered, up from Tuesday's levels of 97.25 bid, 98.25 offered, according to a trader.

Reliant's s 9½% notes due 2013 were seen up nearly three points on the session at 104.75 bid; its 12% notes due 2010 were meantime up even better, at 123 bid from previous levels at 117.

Late Tuesday evening, Houston-based energy operator Reliant announced that it would sell its 770 megawatts of power generating plants in upstate New York to Brascan Corp. for $900 million in cash. The generating assets include 71 hydropower plants and the Carr Street Generating Station cogeneration plant in East Syracuse, N.Y.

Proceeds from the asset sale will be used to repay bank debt of its Orion Power New York and Orion Power Midwest. Reliant acquired the assets in February 2002 as part of its purchase of Orion Power Holdings.

After repaying the bank debt, Reliant said it will have reduced net debt by nearly $3 billion since Sept. 30, 2003.

Mirant higher

Another energy name that was up on Wednesday was Atlanta-based Mirant Corp.; its 2003 bank debt was quoted at 52.5 bid, 53.5 offered, higher by a point on the day, according to a trader.

"It was beaten up for no reason so now it's rebounding for no reason," the trader explained.

A trader in distressed bonds saw the company's Mirant Americas Generating unit notes at 70 bid, 72 offered, up a point on the session; Parent Mirant Corp.'s 7.l40% notes due 2004 were at 55 bid, 56 offered and its 2½% busted convert was unchanged at 53 bid, 55.5 offered.

Pegasus bounces back

The trader also saw Pegasus Satellite Communications Inc. Continuing to gyrate around "like a yo-yo," just as it had on Tuesday. He quoted Pegasus' 13½% notes due 2007 trading in a broad 21 bid, 26 offered context, with most of the company's other issues in a 52-55 bid context.

A market source saw the company's 9¾% notes due 2006 - which on Tuesday had slid to 54 bid from 67.5 previously, were a point better at 55 bid. Pegasus' 12 3/8% notes due 2006, which had nosedived to 51 Tuesday from previous levels around 69, on Wednesday were four points better, at 55. However, he saw little movement in other issues.

Pegasus' bonds had taken a severe beating on Tuesday after the Bala Cynwyd, Pa.-based distributor of satellite TV programming mentioned in a filing with the Securities and Exchange Commission that it could conceivably find itself forced into Chapter 11 under a worst-case scenario, should it be unable to come up with funding to pay a large legal judgment and associated costs.

Air Canada holds steady

A trader said that he had seen "nothing" moving with Air Canada's dollar-denominated 10¼% notes, even on the news that last minute talks between the insolvent Canadian air carrier and its employee unions had reached an impasse.

Those notes were hanging in at the same 31 bid, 33 context they had recently been seen at.

Air Canada is trying to win the approval of a C$850 million refinancing deal with Deutsche Bank that was conditional on the airline getting C$200 million in added cuts from its unions.

But it failed late on Tuesday to win agreement from the powerful Canadian Auto Workers union, which represents 5,900 customer service employees.

The airline's last-ditch proposal called for about C$45 million in cutbacks from the CAW - but the union was unwilling to give more than C$18 million.

Air Canada said that it would "immediately" resume discussions with Deutsche Bank AG and General Electric Aviation Services, the prospective lenders, to determine its next steps.

Salton regains a little

Salton Inc.'s 10¾% notes due 2005 pushed as high as 70.5 bid before falling back from that peak to close at 66.5 bid, 70.5 offered. The Lake Forest Ill.-based small-appliance maker's 12¼% notes due 2008 followed a similar pattern to end at 61.5.

The company's bonds had gotten clobbered last week, with the 103/4s sinking down to the low 50s and the 121/4s into the upper 40s, after the company posted poor quarterly results and said it was in talks with its lenders on credit facility covenant waivers. Then, at the tail end of last week, the bonds started firming off their lows, and the bounce has continued this week so far.

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