Adelphia bank debt attracts buyers; Delphi bonds firm on UAW agreement

By Paul Deckelman and Sara Rosenberg

New York, June 9 - Adelphia Communications Corp.'s bank debt complex as a whole was up by a quarter of a point on Friday, traders said, as buyers started coming in at the lower levels to which the paper has recently dropped.

Bonds of bankrupt automotive components supplier Delphi Corp. were better, helped by the news that the company has reached agreement with the United Auto Workers union and with its former corporate parent and key customer General Motors Corp. on an expanded program that will offer lump-sum buyouts to all of Delphi's UAW-represented hourly workers.

Calpine Corp. bonds - which had fallen in Thursday's session - were seen on the rebound although there was no fresh news seen out on the bankrupt San Jose, Calif.-based power generating company that might explain the recent movements.

Bank debt traders said that Adelphia's Century Old bank debt closed out the day at 95.25 bid, 96.25 offered, up from Thursday's closing levels of 95 bid, 96 offered, while its Olympus term B bank debt closed out the day at 95.5 bid, 96.25 offered, up from Thursday's closing levels of 95.25 bid, 96 offered, the trader said.

The bankrupt Greenwood Village, Colo.-based cable company's bank debt has recently been sliding lower as uncertainty ruled investors' minds over whether recoveries will be put in escrow because of court hearings that were taking place this past week.

In the bond market, Calpine "recouped a couple of points" from Thursday's losses, a trader said, quoting its 10½% notes slated to come due this year as moving up to 70 bid from 68 bid on Thursday. He saw its 8½% notes due 2011 at 49, up a point on the day, while its Calpine Canada Energy Finance II ULC 8½% notes due 2008 moved up to 65 bid, 66 offered from 63.5 bid, 64.5 offered on Thursday.

Delphi up on deal

In the automotive realm, the news that Delphi has reached agreement on an expanded buyout program covering all 22,000 of its UAW-represented hourly workers gave the company's bonds a boost, with a trader pegging Delphi's 6½% notes due 2009 at 86.25 bid, 87.25 offered.

Another trader said that Delphi's 6½% notes due 2013 were at 81.125 bid, 82.125 offered, "up a couple" from prior levels in the neighborhood of 79.25 bid, 80.25 offered.

A trader in distressed issues saw Delphi's 6.55% notes due 2006 at 86 bid, 87 offered, "up one to two points on the day."

Delphi said that Friday's agreement greatly expands the early retirement incentives announced by the company, the UAW and GM in March - and effectively means that all UAW-represented employees will be offered something if they want to leave the company, which is seeking to drastically reduce its labor costs as it reorganizes, by slashing the size of the workforce covered by costly labor pacts.

The agreement announced in March offered retirement incentives for workers with at least 27 years of service, totaling about 13,000 of its 33,000 total hourly workforce, and offered another 5,000 workers an opportunity to return to GM, which owned Delphi until the latter's spin-off in 1999.

The new agreement - which actually was signed by the parties on Monday but which was not publicized till Friday - would offer lump-sum buyouts of $140,000 to workers with at least 10 years of service, while those with less than 10 years would receive $70,000 to leave the company and give up all benefits except for vested, accrued pension benefits.

The previously announced buyout program gave covered employees till June 23 to decide whether to take the money and leave. No deadline has been announced yet under the expanded program, which is subject to approval by judge Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York, who is overseeing Delphi's reorganization.

While the bankrupt Troy, Mich.-based automotive components supplier has pursued its negotiations with the UAW and GM, as well as parallel talks with other unions representing the other 11,000 of its hourly workers in hopes of obtaining similar agreements, it also went to court last month to seek permission to unilaterally abrogate its union contracts, which it says it can no longer afford, and replace them with a less-costly pay structure. However, in view of the "significant progress" it has made in trying to bring its costs under control through the buyout packages, Delphi this past week asked the judge to postpone the next scheduled hearing on its motion, which he did, setting a new date of Aug. 11.

That delay was welcomed by GM, which depends heavily on Delphi as a parts supplier - it is in fact GM's single largest source of automotive electronic components and other parts. Delphi's efforts to win court approval for a unilateral junking of its current labor pacts before their scheduled 2007 expiration have raised the hackles of the UAW and the other unions. Even as they continued their talks with the company, they threatened that any move by Delphi to void the current contracts - even with the judge's approval - would lead to a strike. Such a development would be disastrous for GM, which needs a steady, uninterrupted flow of Delphi parts to maintain production as it seeks to turn its recently lagging fortunes around. To that end, GM, seeking to keep the peace between its problem child and the latter's unions, will offer its superior resources to help troubled Delphi pay for the potentially expensive buyouts, with each company paying an equal share, according to published reports.

GM also helped by news

Delphi's news was seen pushing GM's bonds up on Friday, with the carmaker's benchmark 8 3/8% notes due 2033 up ¾ point at 76.75 bid, while its shorter-term bonds did even better. GM's 6.85% notes due 2008 were seen up 1½ points at 91.5 bid, 92.5 offered. Its General Motors Acceptance Corp. financing unit's 8% notes due 2031 were up 3/8 point at 94.25 bid, 94.75 offered.

Bankrupt Toledo, Ohio-based auto parts maker Dana Corp.'s bonds were also seen a little better, possibly gaining sector strength from the Delphi news. Dana's 7% notes due 2029 were up about a point at 81 bid, 82 offered, although its 6½% notes due 2008 were unchanged at 90 bid, 91 offered.

Owens Corning volatile

Apart from the automotive names, Owens Corning's bonds were seen to have gone on a roller-coaster rise, with its 7½% notes due 2018 pushing as high as 104 bid, 105 offered, a trader said, well up on the day, before dropping back to end at 101 bid, 102 offered, actually down half a point on the session.

"Asbestos was extremely volatile," he said, adding that the bonds "had a little pop, but then gave it all back."

Owens Corning, especially, has seen wild gyration in the value of its bonds over the past several weeks. Those bonds - which had been trading below par about a month ago - zoomed to levels as high as 123 bid last month on the news that the bankrupt Toledo, Ohio-based insulation maker had reached agreement on a reorganization plan with its creditor groups, including claimants seeking damages due to their exposure asbestos, formerly used in the production of Owens Corning insulation. However, after hitting those peaks, the bonds retreated at the end of May and early this month, to levels around 110, mostly on profit-taking, until about the middle of the week, when they slid precipitously to around current levels.

That slide coincided with a Senate hearing on a proposed $140 billion national asbestos trust fund claims mechanism, to be funded by companies with asbestos exposure and their insurers. The fund would pay the claims filed against companies like Owens Corning, Armstrong World Industries Inc., and several dozen other companies driven into bankruptcy by asbestos claims. But the bill setting it up has been stalled in the Senate since February, and critics of the scheme took the opportunity at Wednesday's hearings to further trash the idea, saying that the $140 billion would not be adequate to meet all claims - and that the taxpayers would then get dumped with the responsibility for paying for additional claims.

Armstrong's bonds were also moving around, traders said, but one declared that "we saw more of Owens Corning quoted. Guys were looking more for Owens Corning than for Armstrong."

The bankrupt Lancaster, Pa.-based floorcovering manufacturer's bonds were seen little changed on the day at 75.5 bid. Another trader saw the company's 6½% notes that were to have come due last year as high as 77 bid, 78 offered earlier, before dropping back to 75 bid, 76 offered, up half a point on the day.

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