Salton bonds better as stock soars; Owens Corning bank debt higher

By Paul Deckelman and Sara Rosenberg

New York, April 7 - Salton Inc. bonds were seen trading firmer on Thursday in line with a strong upside move in its stock price - even though there was no real positive news seen out on the Lake Forest, Ill.-based maker of the "George Foreman" brand electric hamburger grills and other small appliances.

In bank debt dealings, Owens Corning's paper was stronger, possibly helped by continued indications in the media that a Congressional bill setting up a trust fund to pay asbestos-related medical claims is still a possibility.

EaglePicher bank debt, meanwhile, was on the downside Thursday, traders said.

A bond trader caught a glimpse of Salton's bonds up about a point on the session, with its 10¾% senior subordinated notes that come due on Dec. 15 at 74 bid, 75 offered, while its 12¼% senior subs due 2008 were at 60 bid, 61 offered.

The trader noted that Salton's New York Stock Exchange-traded shares jumped 49 cents (23.33%) to $2.59 on volume of 203,000 shares, a little heavier than the average 149,000.

There was no actual positive news out on Thursday that would justify such a zoom in the share price, which has been getting pounded down along with the bonds on investor fears of a liquidity crunch amid sagging sales of its products. Analysts have expressed skepticism on the company's ability to scrape together the funds to repay the $125 million of 10¾% bonds when they mature - or even to make the scheduled $9.1 million April 15 coupon payment on the 121/4s. And Salton got some further bad news recently from reports that some users of another Salton product, the Russell Hobbs "Mona Cordless Jug Kettle", allegedly suffered lead poisoning after using the appliance, forcing Salton to recall several thousand of the kettles.

"Salton was a mover all right," the trader said. He said the bonds were probably pushed higher by the strong stock-price rise. "They've got the interest due on the '08 bonds in about a week," he said, and "apparently, some people believe they will be able to skate by and make the coupon." He said that speculation, in the absence of any fundamental news, was pushing the shares up, and "there was a touch of [bond] buying on sympathy with the significant stock price rise that brought the bonds up as well."

Owens Corning loans gain

In bank debt action, Owens Corning was stronger, with levels getting as high as 109 bid, 110 offered before settling back down at 108.5 bid,109 offered by the end of the day, according to one trader.

A second trader had the bank debt quoted at 109 bid, 109.75 offered at the end of the day.

On Wednesday, Owens' bank debt had closed out the session at 108 bid, 108.5 offered.

Owens Corning's bonds, such as its 7½% notes due 2018, were seen as high as 61.5 bid, up from prior levels around 60 bid.

"There was a Bloomberg story saying legislation [setting up the asbestos-claim trust fund] is a possibility and they're pushing for it," the first bank debt trader said in explanation of why the paper got so high.

"Plus the market just felt better today," the trader added.

Earlier this week, the bankrupt Toledo, Ohio-based insulation maker's bank debt had fallen by about half a point - and its bonds were seen down several points - after The Wall Street Journal reported that some insurers who had been part of the effort to craft that $140 billion trust fund to pay asbestos-related medical claims were bailing out, frustrated by the lack of a viable bill.

However, the political leaders involved - notable Senate Judiciary 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.

EaglePicher loans slide

Elsewhere, EaglePicher's bank debt was "flying around in the 98s" on Thursday compared to previous trading levels in the 99s "as the general belief is that the company is continuing to get weaker, and closer and closer to bankruptcy", a trader told Prospect News.

However, according to a second trader, the paper was not active and remained quoted at the 99 bid, par offered level, with the exception of "one low bid" spotted during the session. The trader agreed that most market players feel that the company is getting closer to a bankruptcy filing but remarked that the bank debt is "totally covered", which is why it has stayed closer to that par region.

No particular news was out on the Phoenix-based diversified manufacturing company during the session but over the past few months, EaglePicher's performance has been under some scrutiny.

In fact, in late-March Standard & Poor's lowered its ratings on EaglePicher including the senior unsecured debt to CCC- from CCC and senior secured debt to CCC+ from B- and kept all ratings on CreditWatch negative.

And, in early-February, Moody's Investors Service downgraded most of EaglePicher's ratings including the senior unsecured notes to Caa3 from Caa1 and senior secured bank credit facilities to Caa1 from B3.

Moody's downgrade was a result of the company announcing that it was not in compliance with certain financial covenants under its credit agreement and accounts receivable securitization facility as at fiscal year end Nov. 30, which was later temporarily corrected with a forbearance agreement that's in affect until June 30.

S&P's downgrade was based on a combination of several factors, including extremely tight liquidity; cash and availability on its credit agreement totaled only $11 million as of March 10, and its forbearance agreement with senior lenders expires June 10. Also weighing down the ratings, in S&P's view, are "continued challenges associated with its automotive supplier businesses, potential tightening of credit from vendors, the possibility of alternative financing that could result in coercive exchange or possible bankruptcy filing and challenges in selling and obtaining sufficient proceeds from possible divestitures in a timely manner."

Airline bonds steady

A trader saw little or no activity in the airlines Thursday - despite the news that oil prices were in retreat from recent highs, definitely a piece of good news, since crude prices are a harbinger of possibly lower jet fuel prices. Light, sweet crude for May delivery tumbled as low as $53.77 a barrel intra day, before it settled $1.74 lower at $54.11 a barrel on the New York Mercantile Exchange.

Nonetheless, he saw Delta Air Lines Inc.'s 8.30% notes due 2029 unchanged at 31.5 bid, 32.5 offered. AMR Corp.'s 9% notes due 2012 were seen steady at 75 bid, 76 offered, and Northwest Airlines Corp.'s 8 7/8% notes due 2006 and 10% notes due 2009 were likewise unmoved, at 84.5 bid, 85.5 offered, and 62.75 bid, 63.75 offered, respectively.

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