Most distressed issues lower, led by asbestos, auto names

By Paul Deckelman and Sara Rosenberg

New York, July 17 - Junk bond traders saw distressed issues mostly in retreat Monday amid otherwise quiet trading. Among the names seen leading the parade lower were bankrupt asbestos-challenged credits Owens Corning and Armstrong World Industries Inc. and equally bankrupt automotive component makers like Collins & Aikman Corp. and Tower Automotive Inc.

One company in trouble whose bonds were actually seen higher Monday, bucking the general trend of both the junk market in general and the distressed market in particular, was Sea Containers Ltd., buoyed by reports that the Bermuda-based maritime and railroad transportation company may sell its GNER England-to-Scotland railroad operations in order to avoid a possible bankruptcy filing.

Traders in the bank debt market meantime reported little or no activity in the loan paper of distressed companies on Monday.

A trader in distressed bonds said that Owens Corning took a major hit in Monday's trading, with the bankrupt Toledo, Ohio-based insulation maker's 7½% notes due 2018 falling a full 7 points on the session to 74 bid, 76 offered from 81 bid, 83 offered previously.

A market source at another desk saw the bonds down a more modest 2 or 3 points or so, starting at lower levels and ending at 75 bid. However, that source saw the Owens 7½% notes that were to have come due last year down 6 points at 72.5.

Owens bonds have been cascading downward steadily since about mid-May, when the 2018 71/2s reached a peak level around 122-123 on the news that the company's asbestos claimants and other creditor groups had reached agreement on the outline of a plan of reorganization, that would set up a trust fund mechanism to pay the thousands of asbestos claims which drove the company into bankruptcy six years ago, and would pay off other creditors as well, though not all classes would be made whole.

It was all downhill from there, even as Owens passed significant legal hurdles, including formally filing its reorganization plan and lining up billions of dollars of exit financing.

The bonds of sector peer Armstrong - like Owens Corning, forced into bankruptcy by thousands of asbestos claims - usually move in tandem with Owens, and on Monday a market source saw the bankrupt Lancaster, Pa.-based floorcovering maker's bonds trading at around 70.5 bid, down from prior levels at 72. Another trader saw them even lower, at 69 bid, 71 offered, a 3 point loss on the day.

Werner up

Elsewhere, the trader saw the 10% notes due 2007 of Werner Holding Co. about a point higher at 31 bid, 33 offered, but had no ready explanation for the rise in the bonds of the bankrupt Greenville, Pa.-based maker of metal ladders.

Collins & Aikman, Tower down

In the automotive arena, traders saw a the bonds of bankrupt Troy, Mich.-based automotive interior components maker Collins & Aikman pushing lower, while those of bankrupt Novi, Mich.-based vehicle frames maker Tower Automotive were bouncing wildly around at lower levels before finally settling at a closing level down a few points on the day.

Collins & Aikman's 10¾% notes due 2011 were seen down 4 points on the session at 19.5 bid, 20.5 offered. A trader cited market rumors that the company had been forced to seek changes in its debtor-in-possession financing facility, with investors fearing that this could extend the time it has to spend in bankruptcy.

In fact, according to court documents, the company late last week did get bankruptcy court approval for an amendment to that DIP financing that modifies its negative covenants in order to let Collins & Aikman sell some of its assets.

In a filing Thursday with the U.S. Bankruptcy Court in Detroit, the company said the amendment will allow Collins & Aikman to continue to monetize its non-core assets to make its operations more efficient and to generate additional liquidity to fund future operations and capital expenditures.

Collins & Aikman is seeking to wind down its fabrics business unit, sell its convertibles division and its facilities located in Williamston, Mich., and sell or dispose of other non-core assets, but had to modify the DIP facility, which barred or at least restricted such transactions.

The company hopes to obtain some $75 million of proceeds from the now-permitted transactions, and will be able to use some or all of that money to fund operations and invest in capital expenditures to support awards of new business from one of its major customers. Previously, it had to dedicate all of any sale proceeds to prepaying its DIP lenders.

Collins & Aikman separately was given a two-month extension of its exclusivity period on Friday, giving it more time to develop financial alternatives. Collins will now have until Sept. 27 to file a plan of reorganization and until Nov. 27 to seek votes for it. Creditors or other stakeholders are barred from presenting their own plans and seeking support for them during this period.

Tower Automotive's bonds were meantime behaving like a roller-coaster ride Monday, possibly, the trader said, because of investor fears that their eventual recovery would be well below the levels at which the bonds have been trading.

A trader at another desk saw Tower's 12% notes due 2013 open at 61 bid, 63 offered, then plunge to 54 bid, 55 offered, before climbing out of that hole to end the day at 59 bid, 61 offered.

Dana, Delphi mostly lower

Among other bankrupt parts suppliers, a trader saw Toledo-based components maker Dana Corp.'s 6½% notes due 2008 at 84 bid, 85 offered, unchanged on the day, while its 5.85% notes due 2015 and 7% notes due 2028 were each down ½ point, at 74.25 bid, 75.25 offered and 77 bid, 78 offered, respectively.

And he saw Delphi Corp.'s 6½% notes due 2006 down a point at 82.5 bid, 83.5 offered. However, he saw the Troy, Mich.-based former General Motors Corp. unit's 6½% notes due 2013 and 7 1/8% notes due 2029 each ½ point up, at 78.5 bid, 79.5 offered.

GM's own 8 3/8% notes due 2033 were down half a point on the session, at 78.75 bid, 79.25 offered.

Sea Containers gains on sale report

Elsewhere, a trader saw Sea Containers' bonds better, apparently given a lift on news reports that the troubled Bermuda-based maritime and railroad transportation company might sell its London-to-Scotland railroad operations - thought of as one of its core businesses - in order to raise capital to stave off a possible bankruptcy filing.

He quoted the company's 10¾% notes slated to come due on Oct. 15 at 96 bid, 97 offered, which he called up 1½ points.

Another trader saw the company's 7 7/8% notes due 2008 firmer at 92 bid, 94 offered, while its 10½% notes due 2012 advanced to 94.5 bid, 96.5 offered.

A market source at another desk pegged the 7 7/8s slightly lower, at 91.25, but said the 101/2s were up 1 3/8 points at 94.625 and its 103/4s were a point better at 96.

Sea Containers' NYSE-traded shares were up 22 cents (5.13%) in Monday's trading to close at $4.51, although volume of 123,000 shares was less than one-third the usual daily handle.

Newspapers in Europe reported over the weekend that Sea Containers was looking at the possible sale of its GNER unit, which operates the rail service between England and Scotland. Those reports speculating that such a sale could bring the company about £200 million, which would be used to settle debts and boost its liquidity. They said that Sea Containers had breached several lending agreements with its bankers, creating the necessity for such a sale of what was once believed to be one of the company's core businesses, along with its shipping container business.

Those European news reports warned that the only alternative to a sale would be for Sea Containers to file for Chapter 11 protection from its United States creditors - but such a step would lead to a breach of its U.K. franchise requirements, and might end up with Sea Containers losing the right to run the rail line anyway.

If the rail line is sold, it would come on top of the company's recent agreement to dispose of its Baltic Sea ferry operation, a non-core business, for an estimated $594 million, as part of its ongoing out-of-court restructuring.

Caroline Salls contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.