Asbestos bonds, bank debt jump on election result; Tabletop tumbles

By Paul Deckelman and Sara Rosenberg

New York, Nov. 3 - Bonds and bank debt of asbestos-related names were seen up solidly Wednesday as the distressed-debt market digested the election results - particularly the strong Republican gains in the Senate, including the defeat of the minority leader, senator Tom Daschle (D-S.D.)

Elsewhere, the bonds of Tabletop Holdings - the company now known as Merisant Worldwide Inc. - were seen down sharply, in the wake of the Chicago-based artificial sweetener producer's decision to scrub its planned offering of income deposit securities and senior subordinated notes.

Asbestos "was the name of the game" Wednesday, declared a trader in distressed bonds.

He quoted USG Corp.'s 8½% notes due 2005 as having jumped to 123 bid from 118 previously, while the Chicago-based building materials maker's defaulted 9¼% notes which were to have matured in 2001 pushed up to 122 bid from 117.

At another desk, the 91/4s were quoted at 120, which the market source there saw as a five-point gain on the session, while yet another trader saw the bonds get as high as 123 bid.

It was the second straight session in which the USG bonds were seen solidly higher.

USG's bank debt meantime was seen up four points on the day at 107.5 bid, 108.5 offered. Its New York Stock Exchange-traded shares jumped $5.81 (26.18%) to close at $28. Volume of 6.4 million shares was about seven times the norm.

USG - which entered Chapter 11 early in 2001 to protect the company's assets from a deluge of asbestos-related lawsuits - was only the most prominent gainer Wednesday in the wake of the shift in the Washington balance of power as a result of Tuesday's elections.

Besides the general prospect of a more pro-business climate in Washington with the re-election of President Bush, the strong gains notched by the Republicans in the U.S. Senate - including the defeat of their main nemesis there, Tom Daschle - was seen by observers as making more likely a congressional solution to the asbestos liability crisis that has bankrupted numerous companies over the last several years.

There have been several congressional attempts this year to craft a multi-billion-dollar claims mechanism that would dispense monetary awards to people who say they are suffering as a result of their exposure to asbestos - once widely used as a fire retardant until it was found to be a carcinogen. An important subsidiary issue is protecting the companies from further lawsuits. The various plans all envision the defendant companies and their insurers paying the cost of funding the claims machinery.

Those efforts have so far gone nowhere, chiefly due to the legislative gridlock in the Senate. Daschle had been the point man for the Democrats in negotiations with his Republican opposite number, majority leader Bill Frist (R-Tenn). The two have clashed all year over the size of the planned claims funds, with the Democrats pushing for a larger fund. The two leaders finally agreed last month on a sum of $140 billion. But they remained far apart over other issues, including how many of the hundreds of thousands of existing cases would be allowed to go forward to their conclusion in court once the fund was established. The GOP is looking to limit court action on existing claims and bar future suits, with the Democrats looking to keep as many of the current cases alive as possible and to protect potential plaintiff's future rights to sue. Daschle's narrow defeat by John Thune and the increased GOP majority are seen as strengthening Frist's hand in future negotiations with whomever emerges as Daschle's successor.

While USG was the big winner in distressed-debt trading, other asbestos-challenged names made gains as well.

Owens Corning higher

A trader saw bankrupt Toledo, Ohio-based insulation maker Owens Corning's bonds as having firmed to 54 bid, 56 offered from 49 bid, 51 offered previously, while its bank debt gained four points to 76.5 bid, 77.5 offered.

Bankrupt Lancaster, Pa.-based floorcovering maker Armstrong World Industries Inc.'s bonds were seen up three points at 67 bid, 69 offered, while bankrupt Southfield, Mich.-based automotive parts maker Federal-Mogul Corp.'s bonds were a point better at 29 bid, 31 offered. Its bank paper showed no gains Wednesday, a trader said, but continued to trade actively within its recent context around 94.

W.R. Grace gains

The trader also saw the bank debt of Columbia, Md.-based specialty chemicals and building materials maker W.R. Grace & Co. up about 2½ points at 106 bid, 107 offered in apparent response to the Washington news. Grace's shares climbed $1.51, or more than 14%, Wednesday to $12.10. Grace, like USG, entered Chapter 11 in the spring of 2001 to get away from the barrage of asbestos lawsuits. However, it has postponed to Nov. 16 the filing of its own Chapter 11 reorganization plan because it is in continuing negotiations with its asbestos creditors, including future claimants.

"With more Republicans gaining seats there's a greater likelihood that asbestos legislation will pass because Republicans have already said that they're pretty much on board," the trader said. "Plus, Bush will be involved. There's no Democratic veto power because the Democrat didn't make it."

Merisant plunges

Elsewhere, Tabletop Holdings' zero-coupon notes due 2014 were seen having retreated to 40.5 bid, a loss of 6½ points. That downturn followed the company's announcement earlier in the week that the company - now known as Merisant - has abandoned its plans for a $775 million offering of Income Deposit Securities and a separate offering of senior subordinated notes due 2019. Proceeds would have been used to fund a tender for the Tabletop notes and for Merisant Co.'s 9½% senior subordinated notes due 2013. Those bonds were seen unchanged at 87.5 bid.

Delta up a little

News that Delta Air Lines Inc.'s short-term debtholders had met the minimum tender condition in the troubled Atlanta-based air carrier's pending exchange offer for those bonds helped boost all the company's bonds a bit, traders said. The offer to exchange up to $680 million of new debt for some $1.56 billion face amount of senior unsecured and secured passthrough bonds, which runs through Nov. 18, is considered crucial to the company's effort to stay out of bankruptcy.

However, most in the market agreed that the really sharp upside move in the Delta bonds came last week, on the news that the company's pilots had agreed to wage cuts that will save the company $1 billion annually. Since then, any additional gains have been relatively small.

Delta's 7.70% notes due 2005 - up as much as 30 points over several sessions last week to the mid 70s from the mid-40s - were seen up two more points Wednesday on the latest news to 79.5 bid.

Its 7.90% notes due 2009 were quoted at 47 bid, up 1¼ points, although its 8.30% notes due 2029 gained just a half point to 36.5.

Mirant loans continue rise

Mirant Corp.'s bank debt was once again stronger on the day, with the restructuring Atlanta-based energy company's Mirant Americas Generating Inc. paper quoted higher by about half a point at 98.75 bid, 99.25 offered and the parent Mirant corporate 2003 paper quoted higher by about half a point at 63 bid, 64 offered, according to a trader.

The 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 as a primary impetus.

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

Mirant's bonds, meanwhile, were seen clinging to the levels to which they have recently risen - about 99.75 bid for the MAGI bonds, like 7.20% notes due 2008 and the 7 5/8% notes due 2006, and around 66.5 for the Mirant corporate bonds, such as its 7¼% notes due 2004 and 7.90% notes due 2009.

Mirant bonds, a trader said, "are pretty firm," due to there being "just a lot more buyers than sellers."

On Wednesday, he said, the bonds were "moving up a little," though on "not a lot of activity." He saw both the Mirants and the MAGIs up half a point on the session.

© 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.