Owens Corning bank debt up; Tower bank debt, bonds better

By Paul Deckelman and Sara Rosenberg

New York, Feb. 7 - Owens Corning's bank debt rallied late in the day Monday, market participants said, firming solidly as a hearing on substantive consolidation ended in the late afternoon.

Elsewhere, the bonds and bank debt of Tower Automotive Inc. were being quoted higher as the dust continued to settle following the Novi, Mich.-based automotive component maker's bankruptcy filing last week.

Owens Corning's bank debt was seen moving up to 96 bid, 97.5 offered from 90 bid, 92 offered, according to a trader, although he said that there had been no news out about substantive consolidation hearing results, "but the bank debt has been reacting positively."

The substantive consolidation issue underpinning the bank debt has been a source of controversy among the different classes of creditors wrangling over what kind of returns they will get on their claims when the company finally emerges from years of bankruptcy litigation.

Bank creditors claim priority for their stakes, which in Owens' case reflect loans taken out through different subsidiaries and guaranteed by the parent. Non-bank creditors, such as the bondholders, have sought to essentially collapse the different entities into one consolidated entity and figure out the claims from there.

A market source quoted the bankrupt Toledo, Ohio-based insulation maker's bonds down a point to 72 bid, while seeing the bonds of Lancaster, Pa.-based Armstrong World Industries - another bankrupt company which, like Owens Corning was driven into Chapter 11 under a flood of asbestos-related lawsuits - a quarter-point off at 70.

A trader at another shop, on the other hand, saw an even more pronounced fall in Owens Corning's bonds, quoting them as having opened at 69 bid, 71 offered, then dropping to 64 bid, before partly recovering to finish at 67 bid, 68 offered.

Tower loans rise

Tower Auto's bank debt continued to rise in Monday's market with the tranche quoted at 104.25 bid, 105.25 offered, up about a point on the day, according to a trader.

Since Tower filed for Chapter 11 last Wednesday, the second-lien paper has steadily gotten stronger and stronger, moving up from 102 bid, 103 offered pre-bankruptcy filing.

"It's trading up because in the new Silver Point facility it will be rolled into, pricing will be upped and they'll try to keep the same call protection in place," the trader said.

Silver Point Finance LLC has given Tower a back-stop commitment for second-lien loans and is offering to buy the loans of any second lien lenders that no longer wish to participate at par plus accrued interest. Silver Point will receive a $5.425 million structuring fee.

Back among bond investors, Tower's 12% notes due 2013 were quoted by one trader as having risen to 61 bid, 63 offered, a 11/2-point jump. Those bonds - up from their levels in the mid-50s just before the bankruptcy filing - are now trading flat, or without the accrued interest.

Delta bonds gain

Delta Air Lines Inc.'s bonds were being quoted anywhere from half a point to a point better, in line with a rise in stock prices for the Atlanta-based air carrier and such peers as Continental Airlines Corp., AMR Corp., and Northwest Airlines Corp. Those equities were given flight on easier world oil prices, which in turn brought the bonds along for the ride.

Delta's benchmark 7.70% notes due 2005 were seen up half a point at 88.5 bid, while its 7.90% notes due 2009 were a point better at 52.5. On the longer end of the curve, Delta's 9.34% notes due 2021 were a point better at 41 and its 8.30% notes due 2029 also up a point at 41.5.

Northwest's 7 7/8% notes due 2008 were seen up 1½ points at 76 bid. AMR's 9% notes were seen up nearly a point at 75.5.

Bankrupt ATA Airlines' 13% notes due 2009 and 12 1/8% notes due 2010 were seen unchanged 41 bid, 43 offered. The Indianapolis-based carrier said its pilots' union had okayed management's latest proposed contact, which included sharp - though temporary - wage reductions and other cost savings.

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