Asbestos bank debt, bonds trade actively; Pegasus firmer after filing

By Paul Deckelman and Sara Rosenberg

New York, June 3 - Owens Corning Inc.'s bank debt was down about a point on the day Thursday as investors tried to decipher the latest maneuverings in the Toledo, Ohio-based insulation maker's complex bankruptcy case; meanwhile, bonds and shares of some asbestos-challenged companies were seen moving a bit higher, on speculation that a legislative solution to their problems might emerge after all.

Elsewhere, bank debt and bonds of the now-bankrupt Bala Cynwyd, Pa.-based satellite television programming distributor Pegasus were seen quietly higher, a day after the company's not-unexpected Chapter 11 filing.

Owens Corning's bank debt eased to 75.5 bid, 77 offered, according to a trader who said that the paper "came under a little bit of pressure [due to a] Dow Jones article [on Thursday] reporting [that] Owens Corning and Asbestos Claimants are asking appellate court to reconsider recusal of Wolin."

But, the trader added, "I don't think a lot of people are putting a lot of stock in the article."

On May 27, Owens Corning, the Committees of Asbestos Personal Injury Claimants, James J. McMonagle & Dean M. Trafelet filed a petition for re-hearing in the third circuit court of appeals, according to a court document. The filing includes W.R. Grace & Co. and USG Corp. as well. On June 1 Baron & Budd joined the move.

On May 17 Judge Alfred Wolin was removed from overseeing the Chapter 11 asbestos-related cases due to questions about whether he was impartial.

According to the news report, Owens Corning filed its motion for a rehearing on the grounds that the appellate court's removal of Wolin - who had been overseeing the reorganization cases of not only Owens Corning but also USG, W.R. Grace, Armstrong World Industries and Federal-Mogul Corp. - would set a precedent under which litigants might seek the tactical removal of a judge on dubious grounds, in hopes of getting a more sympathetic jurist.

But not everybody was saddened to see Wolin removed - creditors of the asbestos companies, feeling that Wolin might potentially be improperly influenced because he was being advised by several asbestos plaintiff lawyers working on other, unrelated cases, campaigned for many months to have Wolin taken off the case.

The jurist was ordered off the Owens Corning, USG and Grace cases on May 17, and the appellate court said it would consider removing him from the Armstrong cases as well.

Replacement judges were appointed to hear the cases Wolin had been removed from.

Meanwhile, a trader in distressed bonds saw Armstrong's paper, such as its defaulted 9% notes due 2001 and its 7.45% bonds due 2029 push up to 55 bid from prior levels at 53, and saw Owens Corning firm slightly to 41.5 bid from 40 previously. However, he did not see very much movement in Federal-Mogul, whose bonds, he said were unchanged to perhaps up half a point at 26 bid, 28 offered, or in USG, whose 8½% notes "don't move very much any more," as they stayed in the 104 bid, 105 offered range.

At another desk, a trader agreed that there "was some movement" Thursday in the asbestos bonds, with Armstrong's 6.35% notes having moved up to 56.5 bid, 57.5 offered from recent levels at 52.5 bid, 54.5 offered. The 7.45s, he said, were at 55.5 bid, 56.5 offered. He saw Owens Corning also better, at 41.75 bid, 42.75 offered.

He said he hadn't heard any fresh definite news on the sector, opining he didn't know "if someone was speculating on there being new developments."

Grace's stock was up 57 cents (17.27%) to $3.87 on Thursday, on volume of 2.6 million shares, over five times the norm, while USG was up 90 cents (6.39%) to $14.99 on volume of 1.3 million, about double the usual. There was buzz on internet bulletin boards that an advisory service had reported that Capitol Hill Republicans had proposed a larger asbestos claimant trust fund in hopes of getting congressional action on a claims mechanism started again; the Senate failed to act earlier this spring on a proposed $124 billion claims mechanism plan.

Pegasus term D closes in on par

Elsewhere, Pegasus Media & Communications Inc.'s term loan D moved up about a quarter of a point, heading closer to par, as investors are fairly confident that they will get paid down at par now that the company has filed for Chapter 11.

The D loan traded around a little bit during market hours and closed the day quoted at 99½ bid, par offered, according to a trader.

The Pegasus Satellite Communications Inc. bank debt, which is less liquid than the term loan D, was unchanged at 99½ bid, par ½ offered, with no trading activity seen in the name.

Meantime, Pegasus Satellite's bonds were slightly higher, though in relatively quiet trading following the widely expected filing, which took place after the market closed on Wednesday. Trading on Wednesday, before the bankruptcy filing was announced, had been volatile, with wild gyrations for most Pegasus issues between the upper 40s and mid-50s.

One trader saw most of the company's senior issues, such as the 11¼% notes due 2010, ending up a point or so on the session at around 56 bid, 58 offered, trading flat, without the accrued interest. He saw the company's junior notes, like the 131/2s due 2007, holding in the lower 20s.

But really, he said, "there wasn't much action in them. Most of the activity in them was [Wednesday], when you had an eight-point market."

Late Wednesday, Pegasus Communications Corp. said three of its subsidiaries, Pegasus Satellite Television, Inc., Pegasus Satellite Communications, Inc., and Pegasus Media & Communications, Inc., filed for protection under Chapter 11 of the U.S. Bankruptcy Code.

Pegasus said the filing was done in order to prevent the National Rural Telecommunications Cooperative and DirectTV from seeking to implement the termination of Pegasus Satellite Television's agreements for exclusive distribution of DirectTV services.

Pegasus said it will ask the bankruptcy court to confirm Pegasus Satellite Television's "valuable rights." It will also seek damages resulting from NRTC's and DirecTV's actions to impair those rights, including what Pegasus said was NRTC's breach of its duties to Pegasus Satellite Television, NRTC's majority owner.

The filing is the latest maneuver in an ongoing dispute with DirecTV over the length of its exclusive right to distribute DirecTV services.

Pegasus said the dispute was brought to a head Wednesday morning when NRTC and DirecTV said they were terminating Pegasus Satellite Television's exclusive distribution arrangements with the NRTC.

As part of the termination, DirecTV made a cash offer to Pegasus - payable in either a lump sum or monthly payments - if Pegasus agreed to an orderly transfer of its subscribers to DirecTV , to be completed before Aug. 31.

With this latest move by Pegasus, investors finally received some closure on the whole will they or won't they file for bankruptcy question that had been floating around for almost two weeks now.

Bankruptcy worries arose from a court case involving DirecTV, in which DirecTV won a judgment of $51.5 million against Pegasus, plus interest - money Pegasus said in a filing after the decision that it did not have.

Furthermore, DirecTV later said that judge Lourdes Baird of the U.S. District Court for the Central District of California had entered a judgment in favor of DirecTV Inc. against Pegasus Satellite Television Inc. and Golden Sky Systems Inc. (Pegasus) of $62.6 million, which includes prejudgment interest. DirecTV is also entitled to recover its legal costs, the judge ruled.

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