Asbestos bonds bounce back as panel works on claims bill; more upside for Collins & Aikman, autos

By Paul Deckelman and Sara Rosenberg

New York, May 19 - Bonds of asbestos-challenged companies - which had been reeling on Wednesday on fears that the current Capitol Hill imbroglio over judges and filibusters might derail a long-awaited asbestos claims-payment bill - were once again on the upside on Thursday, bouncing back on apparent market sentiment that maybe a completed bill might be possible after all, especially after Senate Judiciary Committee members worked on amendments to the bill and the panel's chairman said that the legislation has at least a "fighting chance."

Collins & Aikman Corp.'s bank debt, as well as its junk bonds, were meantime continuing to move up, with the Troy, Mich.-based automotive components maker's bankruptcy filing now two days in the rear-view mirror.

Other names from the troubled auto sector also moved up, given a jump start by a rise in Visteon Corp. notes, which firmed in apparent support of the company's newly named president.

The asbestos names had a smart turnaround, with a trader in distressed notes quoting bankrupt Toledo, Ohio-based insulation maker Owens Corning's bonds as having firmed up to 69 bid, 71 offered from prior levels at 65 bid, 67 offered. He pegged the bonds of bankrupt Lancaster, Pa.-based floorcovering maker Armstrong World Industries Inc. also higher, at 75 bid, 77 offered, well up from 70 bid, 72 offered on Wednesday.

At another desk, Owens Corning was seen up three points at 68.5, while Armstrong was four better, at 75 bid.

A market source meantime saw bankrupt Southfield, Mich.-based automotive parts maker' Federal-Mogul Corp.'s bonds advance to 21.5 bid, up from 20.25, although he saw bankrupt Chicago-based building products maker USG Corp.'s notes unchanged, its 9¼% notes that were to have matured in 2001 at 133 and its 8½% notes slated to come due this year at 131, "levels at which they have been for quite a while" despite the ups and down of their fellow asbestos names, he said.

While USG had held steady on Wednesday, Owens, Armstrong and Fed-Mogul had all retreated on investor fears that the increasingly nasty partisan sniping over Senate Democrats' use of the filibuster to bottle up President Bush's judicial nominations would spill over and derail whatever progress was being made in the Judiciary Committee deliberations on a bill setting up a mechanism to take the kind of asbestos-injury cases that drove Owens Corning and the other companies bankrupt out of the courts and instead pay claimants an award from a $140 billion industry-financed claims fund.

But on Wednesday, the bill's author, Judiciary Committee chairman Sen. Arlen Specter, R.-Pa., declared that his brainchild has "a fighting chance" of making it out of committee and being reported out to the Senate floor (see related story elsewhere in this issue). Specter previously set a May 26 target date for having the bill approved by his committee, with the hope that the full Senate might approve it by June.

In Thursday's action on the Hill, committee members considered and approved some of the more than 80 amendments that the bill generated, including one by Sen. Richard Durbin (D.-Ill.) that would ensure that insurers and manufacturers that do not make their mandatory payments into the trust fund will be barred from doing business with Uncle Sam until they comply. However, another Durbin amendment that would strike down a 5% fee cap for attorneys representing asbestos claimants is seen as a long-shot at best, with members of the Republican majority determined to clip the wings of the tort lawyers, whom they say get way too much of the money that the courts award in asbestos suit settlements.

But even though some progress has been made, there were still more than 50 amendments remaining to be considered. And it is by no means clear that the battle over the filibusters still won't impede consideration of the asbestos bill and other legislation.

Collins & Aikman gains

Out of the automotive sector, Collins & Aikman's loan paper closed out the session at 92 bid, 93.5 offered, up from 91 bid, 93 offered on Wednesday.

The company's paper has been steadily moving up since Collins & Aikman announced its Chapter 11 bankruptcy filing on Tuesday. Prior to the bankruptcy announcement it was quoted at 88.5 bid, 90 offered.

The company filed for bankruptcy protection in the U.S. Bankruptcy Court for the Eastern District of Michigan, pointing to mounting liquidity issues and the need for immediate cash to fund operations as the drivers behind the move.

Collins & Aikman's bonds meanwhile were also higher, continuing their rebound from pre-filing levels as low as the mid-30s for its 10¾% senior notes due 2011 and four cents on the dollar for its 12 7/8% subordinated notes due 2012.

After the bankruptcy filing, the bonds climbed smartly on Tuesday and kept going up on Wednesday, although they are now trading flat, or without their accrued interest, partly offsetting some of the nominal gains in price.

On Thursday, the 103/4s pushed as high as 45.5 bid from around 43.5 previously, a market source said. He also saw Collins & Aikman's 12 7/8% subordinated notes due 2012 firm a little to eight cents on the dollar, from seven cents previously.

Collins & Aikman benefited from a generally stronger junk market, as well as specific strength in the usually struggling automotive supplier sector. Thursday's catalyst was the news that Visteon Corp. had hired a new president and chief operating officer, and reports that it was considering selling a number of factories using high-cost labor, as a means of bringing its labor costs lower.

Visteon's 7.95% notes scheduled to mature on Aug. 1 moved up to 97.5 bid, 98.5 offered from 96 bid, 97 offered, while its 8¼% notes due 2010 took what a trader termed "quite a jump" up to 78 bid, 79 offered from 71.5 bid, 72.5 offered earlier. Its 7% notes due 2014 rose to 72.5 bid, 73.5 offered from 67 bid, 68 offered previously.

Visteon's New York Stock Exchange-traded shares jumped $1.24 (32.46%) to $5.06, on volume of nine million shares, about five times the normal activity level.

The shares and bonds were galvanized, in part, at least, by Wednesday's announcement by the Van Buren Township, Mich.-based auto components maker that Donald Stebbins - up till now a Lear Corp. Executive - will take over as Visteon's president and chief operating officer.

Market players were particularly impressed by the fact that incoming president Stebbins leaves behind a secure position as president and COO of Lear's overseas operation to come to Visteon, which has had its troubles, in tandem with those of former corporate parent Ford Motor Co.

Lear moved out of junkbondland and up to investment-grade respectability at Baa3/BBB- in 2003 and 2004, and the 47-year-old Stebbins was theoretically in line to rise still higher at the relatively stable Lear; the conventional wisdom is that for him to leave such a nice sinecure to come to the considerably less stable Visteon (B3/B-) could be interpreted as a vote of confidence in the latter company's prospects, even though they might not look so very hot at the moment.

Those prospects seemed a little better Thursday on reports that Visteon - which has been in talks with former parent Ford on restructuring itself to get on a better permanent economic footing, especially in the area of labor costs - may sell as many as 15 U.S. factories to shed union employees who cost Visteon $60 an hour in wages and benefits.

One report said that such a deal - which would sell those plants to suppliers that pay lower wages - could be announced before June 1. Many of the 17,700 Ford employees who were assigned to work at those Visteon factories could be brought back to Ford itself, or might be offered early retirements.

Exide rises

Another automotive gainer Thursday was Exide Technologies - whose bonds got clobbered Tuesday when the Lawrenceville, N.J.-based battery maker revealed that it will likely breach its credit facility EBITDA and leverage ratio covenants. Those bonds were pretty much unchanged at those lower levels on Wednesday, but they managed to get better Thursday, with the company's 10½% notes due 2013 moving up to 74.5 bid from 72.75 on Wednesday.

Calpine, Adelphia higher

Outside of the auto sector, other gainers included Calpine Corp., whose 8 5/8% notes due 2010 and 8½% notes due 2011 each firmed to 49 bid from 48.5 bid and 47.5 bid, respectively.

Adelphia Communications Corp. - which announced court approval of the settlement of its long-running litigation with the Justice Department - was slightly higher, with its 10 7/8% notes due 2010 up half a point to 87.5, while its 9 7/8% notes due 2007 were quoted two points up at 88.

Under the terms of the settlement, the bankrupt Greenwood Village, Colo.-based cable operator's founding Rigas family agreed to give up 95% of its assets, for a payment totaling $715 million, to settle claims against the family rising out of Adelphia's bankruptcy.

Back in the bank loan arena, Mirant Corp.'s 2003 and 2004 paper was also stronger on Thursday - primarily because of better market technicals in general - with the Atlanta-based energy operator's paper closing out the session at 69.5 bid, 70.5 offered, compared to 68 bid, 69 offered on Wednesday.

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