Adelphia resumes climb; Owens Corning can't sustain rally; WorldCom rising again

By Carlise Newman

Chicago, July 10 - Adelphia Communications Corp. led activity in distressed debt trading Thursday, followed closely by Owens Corning and Armstrong World Industries Inc., pressured by continued opposition to asbestos legislation. In addition, Mirant Corp. bank debt was active after the company was downgraded by Merrill Lynch & Co equity analysts.

Adelphia rose to higher levels Wednesday. The 10 7/8% notes due 2010 rose to 66 bid, 67 offered, a point higher than Wednesday, a trader said. The 9 7/8% notes due 2007 climbed to 68 bid, 69 offered, 2 points higher than Wednesday and soaring from the 61½ bid levels seen Tuesday.

Adelphia's Century old term loan was seen at 85½ bid, 86½ offered; its Century new term loan at 84½ bid, 85½ offered; and its revolver at 85 bid, 86 offered, all up 1 point.

Reports surfaced Wednesday that the bankrupt cable company said it had paid the city of Los Angeles $2.6 million in back franchise fees dating to 1995. Adelphia said the payment covers unpaid fees from 1995 to 1999, before it owned the systems in question, as well as unpaid fees from 1999 to 2002, after Adelphia took ownership of the franchises.

On Sunday, reports circulated that Adelphia's unsecured creditors' committee sued hundreds of banks for providing loans to the Rigas family that controlled the company.

"There was definitely a lot of action in Adelphia's paper today and yesterday. It's been keeping us busy," a distressed debt trader said. "It just keeps gaining and gaining."

In addition, bank loan traders reported the whole cable sector was strong Thursday.

Owens Corning, which had been "topping the gains list" in recent weeks, fell to lower levels Thursday. The 7½% notes due 2018 were seen falling to 53 bid, 55 offered from 56½ bid, 58½ offered Tuesday, when one trader had last seen it. The Toledo, Ohio-based building materials manufacturer's bank debt ended the session at 71½ bid, 73½ offered, unchanged from Wednesday.

In addition, Armstrong World's bonds fell.

"I saw the paper around 65 bid, 70 offered yesterday [Wednesday], and now they're down about 4 points," a trader said, adding that the bonds ended the session at about the 61 bid, 64 offered level.

Mirant was moving after a Merrill Lynch analyst downgraded the company's stock and said the company may not be able to avoid bankruptcy. Mirant's 2005 bank debt was quoted as trading at 68 and ended the session at 68 bid, 69 offered.

"We think the probability of achieving an out-of-court debt restructuring by the July 14 midnight deadline has declined below 50%, maybe well below," news services quoted analyst Elizabeth Parrella as having written in a report. She downgraded Mirant stock to sell from neutral.

The Atlanta, Ga.-based energy company is trying to reach agreement outside of bankruptcy court to refinance $4.9 billion of debt.

In addition, on Wednesday, Mirant said it was offering stepped up amortization on its proposed new bank loan and, if it restructures in bankruptcy court, a slightly higher interest rate and more warrants, according to a filing Wednesday with the Securities Exchange Commission.

On June 2, Mirant unveiled a restructuring plan to avert bankruptcy by extending upcoming debt maturities. The company asked bondholders to exchange $ 1.45 billion existing bonds for new bonds with later maturities, some cash and stock options. It also asked its banks to refinance more than $3 billion in loans.

Last week, the company said it gained approval from the holders of more than two-thirds of bonds for a sweetened version of the exchange. For an out-of-court refinancing, Mirant needs the support from 85% of its bondholders. President Marce Fuller said last week she was confident the company would obtain the 85% bondholder approval needed.

Elsewhere, WorldCom Inc. paper was seen higher Thursday, closing the session at 29 bid, 30 offered from 28¾ bid, 29¼ offered earlier in the day.

"It opened lower Wednesday and stayed there, and today it was doing better," a trader said.

WorldCom's bank debt was seen at 28¼ bid, 29¼ offered. A trader said the debt was fairly active and that there were rumors of a $25 million auction for the bank debt Thursday.

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