Owens Corning bonds higher; Mirant bank debt gains

By Paul Deckelman and Sara Rosenberg

New York, April 6 - Owens Corning bonds and bank debt were seen higher on Wednesday, as investors apparently had second thoughts about the impact of Tuesday's news that a group of insurance companies had withdrawn their support from Congressional efforts to craft a $140 billion mechanism to pay asbestos claims.

Mirant Corp.'s 2003 and 2004 bank debt was seen up about a point to 1½ points on the day, after the bankrupt Atlanta-based energy company announced better monthly results.

"There was a lot of Owens Corning trading," a trader said, quoting its bonds as having moved up to 60 bid, 61 offered from prior levels around 58.5 bid, 59.5.

Owens Corning's bank debt also moved higher on the day, with levels closing out the session at 108 bid, 108.5 offered, versus o 106.5 bid, 107.5 offered on Tuesday, according to a trader.

On Tuesday, the bankrupt Toledo, Ohio-based insulation maker's bank debt fell off by about half a point, after The Wall Street Journal reported that some insurers who had been part of the effort to craft a $140 billion trust fund to pay asbestos-related medical claims are bailing out, frustrated by the lack of a viable bill.

"Legislation. It's kind of wherever the wind blows it," the trader added.

While Owens Corning was up on the day, other bankrupt asbestos-challenged names were seen little changed, with Armstrong World Industries Inc.'s bonds quoted by a market source as clinging to the 65.5 bid level to which the Lancaster, Pa.-based floorcovering marker's securities eased on Tuesday.

Another trader, though, saw the bonds still at 68 bid, 69 offered; he saw Southfield, Mich.-based auto parts maker Federal-Mogul Corp.'s notes at 28 bid, 29 offered and Chicago-based building materials company USG Corp.'s bonds hovering in the 132.5 bid area.

On Tuesday, news came out that about a dozen insurance companies had jumped ship on a plan to set up the insurer and industry-funded claims mechanism, telling the head of the Senate Judiciary Committee that the plan he was drafting was "unworkable."

But both committee chairman Arlen Specter (R.-Pa.) And Senate Majority Leader Bill Frist (R.-Tenn.) downplayed the impact of the insurers' withdrawal, noting that other insurers had not signed on to the withdrawal effort, and predicting that the Senate would soon be voting on the claims mechanism bill, which would essentially take the responsibility for compensating people with medical problems from past asbestos exposure out of the courts, and vest it in the claims fund.

Even as the insurers bailed out, an organization representing companies with asbestos liability concerns wrote to Congressional leaders to reiterate their industry's support for the trust fund effort.

Mirant loans gain

Elsewhere, Mirant's '03 and '04 bank paper was seen having moved up to 75 bid, 76 offered, according to a trader, who said that the market for Mirant felt "really strong".

A trader in distressed bonds meantime said that Mirant's 7.40% notes that were to have matured last year were a point better at 79 bid, 80 offered, while its busted 2½% convertible notes were also up a point at 76 bid, 77 offered.

On Tuesday the Atlanta-based power company put out monthly operating numbers that included a net profit of $63.8 million in January on revenue of $385.58 million.

By comparison, Mirant reported a loss of $581.93 million in December on revenue of $407.64 million.

"Revenues were a little low but people think that's just a result of losing one contract," the bank debt trader added.

Adelphia up on Cablevision bid

A bond trader was quoting Adelphia Communications Corp.'s bonds up one to two points on the session, apparently buoyed by the news that Cablevision Systems Corp. has stepped forward with a $16.5 billion offer to buy the bankrupt Greenwood Village, Colo.-based cable operator.

He saw the Adelphia 10¼% notes due 2011 at 94 bid, 95 offered, up from recent levels at 92 bid, 94 offered, while its 10¼% notes due 2006 were at 88 bid, 90 offered, also up about two points.

Another trader, apparently having already previously pegged those bonds around those respective levels, opined that they were "not much changed." He likewise saw Adelphia's 10 7/8% notes due 2010 steady at 91.5 bid.

Another trader saw the 2011s at 95 bid, 96 offered, up half a point on the day.

Bethpage, N.Y.-based Cablevision, according to news reports, acted alone in submitting its bid, in contrast to previous reports indicating that it would join forces with Kohlberg Kravis Roberts & Co. and Providence Equity Partners, who submitted their own bid for the insolvent Greenwood Village, Colo.-based cabler. TimeWarner Cable and Comcast Corp. also teamed up to submit a joint bid for Adelphia estimated at $17.6 billion.

Although the Cablevision bid is at least $1 billion below the Time Warner/Comcast offer, it is in the form of all cash, versus Time Warner/Comcast's combination of cash and stock.

Even so, "the conjecture is they're not going to be able to pull it off," a bond trader said of Cablevision's gambit.

Level 3 gains

Level 3 Communications Inc. - whose flagship 9 1/8% notes due 2008 had been languishing in the lower 70s just two months ago, before gradually coming back up - was seen about two points higher, with the 9 1/8s at 86 bid and the 11% notes due 2008 at 89.

It was the latest step in a remarkable comeback from the low levels those bonds held in early February, after the Broomfield, Colo.-based telecom company reported fourth-quarter and full-year 2004 earnings. Even though the company managed to narrow its quarterly loss from a year earlier, its bonds and shares fell sharply at that time as company executives warned that 2005 would be "challenging" and filled with "uncertainty" for the company, as revenues from its older businesses taper off, and while it waits for earnings from newer and potentially more lucrative areas like voice over internet protocol (VoIP) to fully kick in.

Tower notes higher

On the automotive front, RJ Tower Corp.'s 12% notes due 2013 were seen about a point better on the day at 56 bid, 57 offered.

Collins & Aikman Products Co.'s bonds were also better, amid a generalized recovery in the auto supplier sector.

A trader saw the Troy, Mich.-based auto components maker's 10¾% senior notes due 2011 at 83, up a point, while its 12 7/8% subordinated notes due 2012 were two points better at 48 bid, 50 offered.

Scotia Pacific down

Scotia Pacific Co. LLC's 7.11% notes due 2014 were quoted at 80 bid, 82 offered, well down from recent levels around 86 bid, 87 offered.

"Its been trading sloppily," a trader observed, noting that on Wednesday, California state regulators put an indefinite stay on a March 16 order by the California North Coast Regional Water Quality Control Board, giving Scotia's corporate parent, The Pacific Lumber Co., permission to expand logging on its acreage in the Freshwater and Elk River watershed to 75% from 50%.

Separately, Scotia Pacific said it hired UBS Securities LLC to help it find a way to restructure $750 million in timber notes, and warned it may not have enough money to make the scheduled July 20 interest payment. UBS will receive $5.6 million if it comes up with a successful restructuring.

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