Asbestos bonds seen higher as hearing on Senate bill looms; Northwest gains on attendants' pact

By Paul Deckelman

New York, Nov. 7 - Asbestos-related issues were seen a bit better in Monday's dealings amid the news that the Senate Judiciary Committee will hold a hearing next week on whether the planned $140 billion asbestos claims mechanism now before Congress will be large enough to cover all of the expected claims. It would be the first sign of movement at all on the bill in months.

Elsewhere, Northwest Airlines Corp. bonds continued to rise Monday as the bankrupt Eagan, Minn.-based Number-Four U.S. airline carrier announced that it had reached temporary agreement on labor and benefit-cost concessions with the union representing its flight attendants - the second union group it has reached an accord with in recent days.

There's no accord between Delphi Corp. and its unions - and in fact, the unions say they will go to the mat against the bankrupt Troy, Mich.-based automotive electronics manufacturer's efforts to sharply cut their pay and benefits. Delphi bonds were meantime lower in the wake of Friday's derivatives auction.

Traders saw bankrupt Toledo, Ohio-based insulation maker Owens Corning's bonds "a little higher, up a couple [of points]" said one trader, who saw those bonds at 76.

Another trader, while saying that "it doesn't look like the asbestos bonds were very active at all," estimated the Owens Corning bonds two points higher at 77 bid, 78 offered.

At the same time, bankrupt Lancaster, Pa.-based floorcovering maker Armstrong World Industries' 7.45% notes were seen up about half a point at 71.5 bid, 73 offered.

Word came from Washington late Friday that the Senate Judiciary Committee will hold a hearing - tentatively slated for next week - to look into concerns that the $140 billion asbestos claims payment bill the committee approved back in May might not be big enough to meet all of the claims that are expected to arise.

While it is unusual for a congressional committee to hold a hearing on a bill's issues after the committee has already approved the bill and reported it out to the floor, the prospect of the Senate panel hearing is, unexpectedly, a positive, since it gets the ball rolling again on the claims bill, which has languished, unacted-upon, since the committee approved it in May. Full Senate action on the bill has been put off repeatedly, and now is not expected to occur until early next year, at the soonest.

The hearings are also seen as a sign that the powers that-be on Capitol Hill are taking seriously criticisms that the claims bill approved by the Judiciary Committee is too small to meet the anticipated flood of asbestos claims, which would be taken out of the courts and handled instead through the claims mechanism, should it ever be put into effect.

Concerns that the claims fund - financed by the asbestos companies and their insurers - is not large enough to meet all claims is a factor that is undermining bipartisan support for the controversial bill.

In September, a study by a Washington economic consulting firm said the proposed fund could run out of money after only a year or so of operation; it estimated that claims against the fund could total anywhere from about $300 billion to $565 billion.

Northwest higher

Apart from asbestos-challenged names, Northwest Airlines said that its interim deal with the Professional Flight Attendants Association will save the airline $117 million. The news helped boost the carrier's bonds to around 33 bid, up from prior levels around 31.5 bid to which those bonds had firmed last week on the airline's announcement that it had reached a similar concession agreement with the Airline Pilots Association that gives the carrier $215 million in annual savings - less than it was seeking from the 5,200 pilots, but enough to stay the airline from asking the bankruptcy court to completely throw out the contract with the captains.

Also on the airline front Monday, Delta Air Lines Inc.'s bonds were "a little better," a trader said, pegging its paper at 18 bid, 18.5 offered, up a point from recent levels.

Elsewhere, Curative Health Services Inc.'s 10¾% notes due 2011 continued to languish around a 64-65 bid context, trading flat, or without their accrued interest, apparently little moved by the late-day news that the Hauppauge, N.Y.-based medical products and services company had gotten a loan waiver from its bank lenders for leverage ratio and bond interest payment defaults.

Curative had announced last Monday that it would not make the scheduled Nov. 1 coupon interest payment on the bonds, instead invoking the standard 30-day grace period and saying it would hold talks with its noteholders and evaluate all of its options.

Calpine holds at lower levels

Calpine Corp. - whose bonds were down Friday as junk marketeers delivered a vote of no confidence in the San Jose, Calif.-based power generating company, following its embarrassing withdrawal late Thursday of erroneous third-quarter earnings data it had released earlier that day - seemed to have pretty much stabilized, traders said, with the decline pretty much limited to a little bleeding around the edges.

Calpine's 8½% notes due 2008 was seen down half a point at 53 bid, 54 offered, said a trader who saw activity in the company's as "very, very quiet. There's a hearing on the 11th about the funds that are tied up with the trustee, the Bank of New York, and I think people are waiting around to see if they get that cash or not."

Calpine's access to several hundred million dollars of the proceeds from an asset sale were blocked by several bondholders, who contended that Calpine's purchase of natural gas for its plants was an improper use of the sale proceeds - a contention Calpine rejects.

Refco up as auction nears

Refco Inc.'s 9% notes due 2012 were quoted up a point, to 76 bid, 78 offered by a trader. News reports said that bids submitted Friday for the bankrupt New York based financial company's futures operation and possibly some of its other assets had come in around the $1 billion area - more than originally expected. Refco will conduct an auction for the assets on Wednesday, at which point current bids could climb higher.

Delphi steady

Delphi Corp., whose bonds had been hammered down from the upper 60s to around the 63ish level on Friday, when an auction to determine the value of some derivatives contracts that protected against the bankrupt Troy, Mich.-based automotive electronics manufacturer defaulting on its debt established a value in that area, was seen by traders Monday to be little changed.

One trader quoted Delphi's 6.55% notes due 2006 and all of the company's other bonds in a 62.5-63.5 context, which he said was unchanged.

At least two other traders saw those bonds trade at 61 bid, 62 offered, which they called down two points, but the said there had not been much activity there.

They saw little market reaction to the news that a coalition of unions representing some 33,000 active Delphi workers announced its intention of vigorously fighting the company's demand for sharp rollback in pay and benefits it pays to its workers, claiming that Delphi is using the bankruptcy process "to dictate the radical destruction of the living standards of America's industrial workers."

Delphi meantime said it planned to continue negotiations on a new labor structure with the United Auto Workers union and the other five unions in the coalition - the International Union of Electrical Workers-Communications Workers of America, the United Steelworkers, The International Brotherhood of Electrical Workers, the International Association of Machinists and Aerospace Workers and the International Union of Operating Engineers. Delphi has demanded cuts of as much as 60% in wages and benefits, saying it cannot survive otherwise.

Also on the automotive front, Dura Automotive Systems' benchmark 9% notes due 2009 were seen down as much as 1½ points, a trader said, to around the 57 bid, 58 offered area.

A market source at another desk also saw the Dura bonds down by that same amount, but said that only brought the bonds down to about the 58.5 area.

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