Owens Corning bonds off even as court OKs disclosure statement; Collins & Aikman paper moves up

By Paul Deckelman and Sara Rosenberg

New York, July 10 - Owens Corning's bonds - which have been on a wild ride the last few weeks - were seen down about two points on Monday, even as the federal judge overseeing the Toledo, Ohio-based insulation maker's bankruptcy reorganization okayed its disclosure statement, a key step in the company's plans to emerge from Chapter 11 later this year. Bonds of Armstrong World Industries Inc. - which like Owens Corning, was driven into bankruptcy by asbestos liability problems - were also lower on apparent sector sympathy.

In the bank debt market, Owens Corning's paper traded up, as did Collins & Aikman Corp.'s loans. Traders in that market cited investor optimism about the possibility of seeing a bid for the bankrupt Troy, Mich.-based automotive interior components manufacturer emerge sometime this week.

That bullishness sent Collins & Aikman's bank debt home quoted at 94.5 bid, 95 offered, up half a point from Friday's levels of 94 bid, 94.5 offered, a trader said.

Market talk is that there are a couple of parties interested in buying the company - although a bid of $1 billion is needed in order for the bank debt to get paid down at par.

One possible bidder is financier Wilbur L. Ross - who has already successfully consolidated the steel and coal industries by buying up assets of bankrupt companies, forming them into one company and negotiating more favorable labor agreement with their unions. Ross' International Automotive Components holding company has already bought Collins & Aikman's European business and, along with partner Lear Corp., is studying the domestic operations as well.

Owens Corning loans up

Bank loan traders also saw Owens Corning's paper trading up on Monday, closing out the session quoted at 158 bid, 158.5 offered, up about ¼ to ½ point on the day. A trader said that he had seen no particular news to push the debt higher - although late in the day, federal judge Judith K. Fitzgerald approved Owens Corning's plan for emerging from bankruptcy this fall.

After that formal approval of the disclosure statement, Owens Corning's proposal will be sent to the company's creditors for a vote before a scheduled Sept. 18 confirmation hearing.

As part of its plan, Owens Corning will pay more than $5 billion to asbestos claimants, and as much as $2.27 billion to holders of bank debt. The company envisions coming out of bankruptcy as of the end of October - fully six years after it was driven to seek bankruptcy protection under a veritable deluge of asbestos medical claim lawsuits, one of dozens of companies, also including Armstrong, that were forced to take such a step.

Owens Corning's bonds have been bouncing dizzily around over the past five or six weeks, pushing as high as 122-123 in late May on word that the asbestos claimants and other creditor groups had approved the outlines of its plan in principal - but then plunging back down into the low 70s in the weeks that followed on profit-taking, investor fears that objections might delay the plan, and investor frustration over the Washington stalemate that has bottled up Senate consideration of a national federally administered asbestos claims mechanism that would supersede the individual plans of companies such as Owens Corning if enacted.

After touching its lows in the 70s, the Owens Corning bonds had moved back up into the 80s in recent days on market speculation that the company's plan would receive court approval. In what is probably a case of the classic market adage "buy [on] the rumor, sell [on] the news," the company's 7½% notes that were to have come due last year were seen by a trader at 82 bid, 83 offered, down two points on the day. He also saw Armstrong's 6½% notes, similarly due in 2005, down two points as well, at 69.5 bid, 70.5 offered.

A trader at another desk saw Owens Corning's bonds "down a point or two," with its 7½% notes due 2018 at 81 bid and its 7% notes due 2009 at 78 bid, 80 offered.

Movie Gallery bonds gain

Elsewhere, Movie Gallery Inc.'s 11% notes due 2012 were seen up about a point at 79 bid, 80 offered.

Although market participants said they saw no particular fresh news out on the Dothan, Ala.-based video-rental chain, they noted that its bonds and its shares have been given a boost lately by market buzz that the company might make an attractive acquisition target for larger competitor Blockbuster Inc. or for internet-based movie rental operation Netflix Inc.

Back in the automotive realm, a trader said that that there was "nothing really new" with General Motors Corp., quoting the Detroit giant's benchmark 8 3/8% notes due 2033 as having opened up a point at 80.75 bid, 81.75 offered, perhaps still coasting on the momentum generated last week when GM's board voted to engage in talks on possibly joining the existing alliance between French automaker Renault SA and its 44%-owned affiliate, Japanese car manufacturer Nissan Motor Co. However, by the end of the day, he said, the bonds had backed down to 80 bid, 81 offered, "basically unchanged."

A trader saw GM's former subsidiary, the bankrupt Troy, Mich.-based components supplier Delphi Corp., mixed, with its 6.55% notes due 2006 down half a point at 83.5 bid, 84.5 offered, while its 6½% notes due 2013 and 7 1/8% notes due 2029 were up ¼ point at 78.25 bid, 79.25 offered.

Bankrupt Toledo, Ohio-based auto components supplier Dana Corp.'s 5.85% notes due 2015 were at 76.5 bid, 77.5 offered, up a point on the session.

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