USG bonds higher; airlines quiet despite oil decline; Mirant bank debt keeps firming

By Paul Deckelman and Sara Rosenberg

New York, Nov. 2 - USG Corp. bonds were heard to have firmed solidly Tuesday although there was no firm positive news out about the Chicago-based building materials company, which has been in bankruptcy since 2001 on asbestos-related concerns.

Traders meantime saw little or no movement in the volatile bonds of the airline sector, which had recently been trending higher, especially the notes of beleaguered Atlanta-based carrier Delta Air Lines. The bonds of Delta and other operators were largely unchanged even despite a rise in airline industry shares prompted by lower world crude oil prices.

In the bank debt sector, Mirant Corp.'s MAGI (Mirant Americas Generating Inc.) bank paper once again traded stronger during market hours, participants said, with several different sources citing different possible catalysts for the move.

USG's defaulted 9¼% notes due 2001 were quoted by a market source at 115 bid, which he said was up as much as 12 points from recent lower levels. He also saw the USG 8½% notes due 2005 at 117 bid, which he saw as a six point rise over prior levels, although the source acknowledged that he had not been following the bonds every day and their movement may have come over the course of more than one session.

A trader specializing in distressed bond debt, while seeing both bonds at even higher levels - the 91/4s at 118 bid and the 81/2s at 120 - saw the bonds actually up only "a couple of points." USG, he said, had been trading only a few points lower than Tuesday's gains "for a while."

Yet another trader pegged the 8½% notes as having risen to 121.5.

Nobody saw any fresh news out on the company, which was forced into bankruptcy in 2001 in response to a deluge of asbestos-related liability lawsuits.

A trader meantime said there had been little or no movement observed in other asbestos-related names, even as "USG was moving around."

He saw Owens Corning debt still hanging in a 47 bid context that the Toledo, Ohio-based insulation maker's bonds have recently held, allowing that: "I didn't see Owens move that much."

The trader also saw bankrupt Lancaster, Pa.-based floorcovering maker Armstrong World Industries - like Owens Corning and USG, driven into Chapter 11 by the asbestos lawsuits - "pretty quiet," hovering around 63 bid.

The bankrupt Federal-Mogul Corp., an asbestos-challenged Southfield, Mich.-based auto components maker, continued to cling to levels around 29, "unchanged in a while," the trader said.

Tower rebounds

Another automotive name in the news Tuesday was Tower Automotive's R.J. Tower Corp., whose 12% notes due 2013 had risen to around 70 bid on positive financing news, only to fall back to about 68 Monday as problems popped up - a report Monday said that the parent company's senior secured second-lien bank credit facility lenders rejected a proposed amendment to increase its accounts receivable securitization basket to $200 million from $50 million. On Tuesday, though, a trader saw those bonds regaining all of their lost ground, up two points.

Airlines quiet

Airline bonds were seen generally quiet, even as the shares of the air carriers headed skyward as petroleum prices dipped below $50 a barrel in intraday trading - the first time in literally weeks that the support level had been breached to the downside.

Delta bonds "were pretty much unchanged, even though the stock was moving," a trader said, quoted the carrier's 7.70% notes due 2005 at 76 bid, 78 offered.

At another desk, the 7.70s were seen down half a point at 77.5 bid, while the 7.90% notes due 2009 were actually a quarter point better at 45.75. Delta's 8.30% notes due 2029 were unchanged at 36.

A trader, while seeing nothing doing in Delta, saw other airline issues equally quiet, spent after the recent roller-coaster ride in Delta stock and bonds, spurred on by expectations - which proved to be correct - that the union representing the line's 7,000-plus captains would agree to the company's demand for $1 billion of pay cuts.

He saw Northwest Airlines' 10% notes due 2009 holding steady at 70 bid, 72 offered, while AMR Corp.'s 9% notes due 2012 stayed at 63 bid, 65 offered.

Mirant loans higher

In bank debt dealings, the Mirant MAGI loan paper was seen by a trader to have settled in at 98 bid, 98.5 offered by the end of the day. On Monday, a different trader had the paper quoted at 97.25 bid, 98.25 offered.

The Atlanta-based energy company's debt has been steadily rising over past couple of sessions, with some sources pointing to Mirant's release of positive operating numbers early last week.

However, some are also saying that various rumors regarding Mirant and its restructuring process have helped the MAGI paper as well.

"There are all kinds of rumors floating around, like Mirant may come out with a plan before Thanksgiving and all sorts of other things but there's no real news," a trader said.

Among bond players, the MAGI 7.2% notes due 2008 and 7 5/8% notes due 2006 were both seen up 1¾ points at 99.75 bid, while the Mirant corporates like the 7¼% notes due this year and the 7.9% notes due 2009 were both seen unchanged at 66.5 bid.

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