Owens Corning bank debt gains; Metaldyne boosted by buyout buzz

By Paul Deckelman and Sara Rosenberg

New York, Aug. 24- Owens Corning's bank debt traded in big blocks at higher levels during Thursday's session, as the company is getting closer to emerging from Chapter 11, traders said.

They also saw Movie Gallery Inc.'s paper bouncing around crazily, before settling in to end little changed.

In the junk bond market, Metaldyne Corp.'s bonds pushed up, as a news service speculated on the possibility that the Plymouth, Mich.-based maker of metals parts for the automotive industry might be bought out. However, a trader said most of the early gains evaporated.

Owens Corning's bank debt closed out the day quoted at 159 bid, 159.5 offered, up about ¼ to 3/8 of a point when compared to previous levels, a trader in that market said.

He said that the Toledo, Ohio, building materials company is "moving towards exiting from bankruptcy. As it gets closer [the bank debt] creeps up higher and higher."

A junk bond market source meanwhile saw the company's 7½% notes due 2018 up 2 points at 55.25 bid, while its 7% notes due 2009 rose to 54.125, a 5/8 point gain on the day. Its 9 3/8% notes due 2012 were a point better at 73.875.

However, a distressed-debt trader at another desk saw the Owens 71/2s unchanged at 54 bid, 56 offered, and likewise saw the bonds of the bankrupt, asbestos-challenged Lancaster Pa.-based floorcovering maker Armstrong World Industries Inc. steady at 65 bid, 67 offered.

Movie Gallery moves around

Bank debt traders saw Movie Gallery's term loan bouncing around a bit during market hours, with trades going off as much as ¾ point stronger, before settling back in to close out the day only slightly higher.

The term loan traded as high as 94.5 but by late in the day settled in at 93.75 bid, 94.5 offered, a trader said. Overall, Thursday's closing levels ended up better by about ¼ point compared to Wednesday's close.

No specific news was seen as sparking the momentum, the trader added.

Bond traders meantime mostly saw the Dothan, Ala.-based video rental company's 11% notes due 2012 little changed from the 66-area at which they had traded on Wednesday, although one source pegged the bonds considerably higher, at 68, up 1½ points on the day.

Another, though saw a more conservative 3/8 point rise to 66.375.

Metaldyne moved by M&A report

Among the automotive names, Metaldyne's bonds were seen better, this after having bounced around on Wednesday, first firming from previously oversold levels and then giving back most of those gains as key customer Chrysler Group announced cuts in its pickup truck and SUV production. Those bonds had been battered on Monday and Tuesday after Standard & Poor's said the company, and seven other suppliers, were under scrutiny for possible downgrades in the wake of big output cuts by customer Ford Motor Co.

After Wednesday's abortive attempt to go up - with most of the early gains surrendered later in the day when customer Chrysler announced production cuts - Metaldyne was once again strong in the early going on Thursday. Traders cited a news report on the DebtWire service that a buyer might be interested in the company.

"Who knows?" said one, quoting its 11% notes due 2010 up 4 points in morning trading, as the bonds pushed into the lower 80s, "but as the day progressed, they gave most of it back" and ended at 76.5 bid, 77.5 offered, up just ½ point. He saw the company's 10% notes due 2013 up ¾ point on the session at 95.5 bid, 96.5 offered.

A source at another shop, though, said that while Metaldyne's 11% bonds did bounce from opening levels around 78 to as high as 82, before dropping back into the upper 70s during the afternoon, there was some late trading in the name that lifted those bonds back up to their day's peak by the day's end. The 10s, meantime, traded in a tight 95ish context all day, the source said.

Ford mulling going private?

And even as M&A speculation swirled around Metaldyne, USA Today was reporting that Ford itself might be bought out, saying that members of the struggling auto giant's founding Ford family, including chairman Bill Ford, were considering taking the company private. The Fords currently own 5% of the outstanding shares and control 40% through a separate class of stock, the paper said. Such a step would let chairman Ford and his inner circle move more quickly to try to turn the carmaker's fortunes around without having to answer to public shareholders.

Ford's 7.45% notes due 2031 were up ¾ point at 76.75 bid, 77.25 offered.

A trader, citing the going-private rumors generated by the USA Today report, ironically opined "good luck on that," noting that it would cost so much to buy Ford - at least $14 billion, piling even more debt on top of the company's tens of billions of dollars of already outstanding paper - that "they wouldn't have two sticks to rub together after that to try to improve the company."

Rotech rises

A market source saw Rotech Healthcare Inc.'s bonds healthier - although there was no fresh news out on the problem-plagued Orlando, Fla.-based provider of home medical equipment and related products and services that might explain the gain.

The source saw the company's 9½% notes due 2012 trade in a 68-69 context for most of the day, pretty much unchanged, but then push up to around 73 bid on a series of small to moderate sized trades late in the session.

Another trader, though, saw the bonds at 68.5 bid, 69.5 offered, which he called a 1½ point rise on the day. Yet another trader called them a point higher at 68 bid, 70 offered.

The company's Nasdaq Global Market shares were up 10 cents (7.14%) to finish at $1.50.

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