Adelphia bonds continue gains; W.R. Grace bank debt active amid auction

By Paul Deckelman and Sara Rosenberg

New York, Nov. 23 - Adelphia Communications Corp. bonds were seen continuing their firming trend despite a lack of fresh positive news about the bankrupt Greenwood Village, Colo.-based cable operator.

Among bank debt investors, W.R. Grace & Co.'s bank debt was heard actively trading around as an auction for $15 million of the paper took place in the morning.

A trader in distressed bonds quoted Adelphia as "still firm in the bonds, maybe a point better on the coupons while the converts still languish" around the 16-18 bid level.

He saw Adelphia's 10¼% notes due 2011 firm to 96.5 bid, 97.5 offered from 95 bid, 97 offered, the level to which the bonds had risen in Monday's dealings. He also pegged the Adelphia 10¼% notes due 2006 improving to 92 bid, 93 offered from 91 bid, 92 offered on Monday. He saw no specific positive news out on the company.

A market source at another desk said that the Adelphias "might have been up a little," quoting the 101/4s due 2011 at 96 bid, up from 95.25, while the 10¼% notes due 2006 rose to 90.5 bid, 89 offered. He also saw Adelphia's 10 7/8% notes due 2010 up nearly two points at 93.5 bid.

Another source estimated parent Adelphia's 9 7/8% notes due 2007 as 1½ points better at 91 bid while Adelphia's Century Communications Inc. unit's 8 7/8% notes due 2007 continued to hover in nosebleed territory at 119.

Adelphia sought protection from its bondholders and other creditors in June 2002, following the ouster from power of its founder, then chairman John J. Rigas, and certain members of his family who occupied senior management positions, amid charges - which they denied - that they had, in the words of federal prosecutors, used Adelphia "like a private piggy bank."

Adelphia is in the process of trying to sell its assets - or sell the whole company at once - to deep pocketed buyers at an auction for those assets, which could fetch its creditors anywhere from $17 billion to $20 billion, according to published reports.

W.R. Grace loans trade near offer

In bank debt trading, W.R. Grace's loan paper was heard by a market source to have traded towards the offer side at 117.

By the end of the day, most were still quoting the bank debt around 115 bid, 117 offered, the source added.

Columbia, Md.-based building products maker Grace - along with other asbestos-challenged names - has seen a pretty remarkable gain starting with election results at the beginning of this month, which put more Republicans in the Senate. Many observers believe this would be a good thing for the chances of passing a bill setting up a payment mechanism for asbestos claims and curbing the explosion of litigation that drove Grace and many other companies with asbestos issues into bankruptcy.

And then, around mid-month, the debt got another push as the company filed its plan of reorganization and disclosure statement with the federal bankruptcy court in Wilmington, Del.

Under the Grace reorganization plan, a trust would be established for all pending and future asbestos-related claims; all allowed administrative or priority non-asbestos claims would be paid totally in cash; and all allowed general unsecured claims would be paid in 85% in cash and 15% in Grace common stock.

Financing for these non-asbestos related claims would come from $150 million of cash on hand, $115 million from Fresenius Medical Care Holdings Inc. paid in settlement of asbestos and other Grace-related claims, $800 million in new debt and $143 million in value of Grace common stock.

The plan needs to be approved by eligible creditors and the bankruptcy court, but the disclosure statement needs to be approved first. Grace has requested a hearing on the disclosure statement for Dec. 20.

Grace has been in bankruptcy since April 2, 2001.

Asbestos names on the move

The bonds of other asbestos-challenged names meantime continued to gyrate around, with a trader saying that he saw the bonds of Toledo, Ohio-based insulation maker Owens-Corning "going up, while Armstrong [World Industries] was going down. Don't ask me why." He suggested that someone might have put out a research note on the relative valuation of the various bankrupt bond issuers, but couldn't say for certain.

He saw Owens Corning's bonds firming to 72 bid, 74 offered from 67 bid, 69 offered, while the bankrupt Lancaster, Pa.-based floorcovering maker Armstrong's bonds dipped to 67 bid, 69 offered from 70 bid, 71 offered.

Another trader saw the Owens-Corning bonds up half a point at 68, but the Armstrongs still unchanged at 71. He saw bankrupt Chicago-based building materials maker USG Corp.'s two issue of bonds unchanged in the high 120s.

Northwest up as loan closes

A trader saw Northwest Airlines Corp.'s late-afternoon announcement that it had completed its arrangements with its lenders to restructure its 975 million revolving credit line pushing the Eagan, Minn.-based air carrier's notes a bit higher, its 7 7/8% notes due 2008 estimated to have firmed to around the 76.5 bid level.

The agreement with the lenders was the final condition that Northwest said it needed to meet in order to implement a pilot concession package. Some $300 million of cost savings now go into effect on Dec. 1. The new term loan replaces a fully drawn facility.

He said that the Northwest agreement news had also given a little lift to the bonds of others in the troubled airline sector such as Delta Air Lines Inc., Continental Airlines Inc. and American Airlines parent AMR Corp.

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