Asbestos bonds better; Levitz Furniture continues slide

By Paul Deckelman and Sara Rosenberg

New York , Oct. 6 - Bonds of asbestos-challenged companies were being quoted a point or two better Thursday, traders said, crediting the rise to a feeling - maybe just a hope - among investors that the Senate will act soon on a long-awaited bill that would set up a trust fund out of which all asbestos claimants would be paid.

Elsewhere, traders said Levitz Furniture Inc. bonds continued the slide that began earlier in the week, although nobody had any explanation.

And airline bonds were seen little changed on the session, despite some relatively good news, including a fall in crude oil prices - seen as a harbinger for future jet fuel price trends - and United Airlines' announcement that the bankrupt Number-Two U.S. airline carrier had lined up $3 billion of exit financing and hopes to emerge from bankruptcy around February of next year.

A trader saw bankrupt Toledo, Ohio-based insulation market Owens Corning's 2018 bonds up two points on the session at 85 bid, 86 offered, while its 2009 bonds were at 83 bid, 84 offered, also up a deuce.

He saw bankrupt Lancaster, Pa.-based Armstrong World Industries' 6-handle bonds a point better, at 75 bid, 76 offered, while its 9-coupon bonds were at 80 bid, 81 offered, two points ahead.

At another desk, a trader saw Owens Corning's bonds at 85 bid, 86 offered, "up a point on the session and five points so far this week," he said, "on speculation that legislation will finally be passed."

That legislation - already approved earlier this year by the Senate Judiciary Committee - would set up a $140 billion trust fund, out of which asbestos claims would be paid, thus taking the claims out of court and shielding companies from further potentially ruinous asbestos liability.

The Congressional newspaper The Hill reported this week that the chairman of the Judiciary Committee, Sen. Arlen Specter, R-Pa., and the ranking Democratic member, Sen. Patrick Leahy of Vermont, "have tipped off colleagues that a floor vote on their asbestos trust-fund bill could take place this month" - although the paper said that lobbyists on both sides of the issue believe that Specter's timetable may be way too optimistic. The paper said the lobbyists note that the there seems to be little real enthusiasm for the bill, much opposition to be overcome, including from the powerful AFL-CIO labor group, and a full slate of competing issues likely to distract the attention of the senators and hold up their consideration of the asbestos bill, including the coming battle over the president's Supreme Court nominee and what to do about aid to regions hit by Hurricanes Katrina and Rita.

Levitz keeps dropping

Elsewhere, a trader said that Levitz Furniture - whose bonds fell about 15 points on Tuesday, for no discernable reason - was down again Thursday, its 12% bonds due 2011 swooning down to 34 bid 38 offered from 40 bid, 42 offered, while its 15% bonds due 2011 declined to 12 bid, 14 offered, down a point from 13 bid, 15 offered.

In Tuesday's dealings, the 12% notes had settled the day at 42 bid, 45 offered, down from Monday's close of 57 bid, 59 offered, while the 15% notes on Tuesday had dropped to 15 bid, 18 offered from 31 bid, 33 offered, a sellside trader remarked.

Airlines little moved

A trader saw little or no moves in airline names, despite crude oil prices dropping for the fifth day in a row, to two-month lows. Light, sweet crude for November delivery on the New York Mercantile Exchange fell $1.43 to finish at $61.36 a barrel. That's the lowest settlement since Aug. 3, and is more than 13% off its recent high of $70.85, although it is still up considerably from year-ago levels. Crude price movements are seen as a leading indicator for the future direction of jet fuel prices, whose skyrocketing rise this past year has played havoc with the fortunes of many airlines, including Delta Air Lines and Northwest Airlines, both of whom are now in bankruptcy.

A trader saw the bonds of Delta, the Atlanta-based Number Three U.S. carrier, unchanged around 18 bid, 19 offered, and also saw no movement in the bonds of Eagan, Minn.-based Northwest, the Number-Four U.S. carrier, which were at 28 bid, 29 offered.

He also saw no change in UAL's bonds even on the news that the bankrupt Elk Grove Village, Ill.-based airline operator has gotten financing commitments from JP Morgan and Citigroup. The six-year package totals about $3 billion.

The company's bonds were steady at 14.5 bid, 15.5 offered.

Mirant debt falls

Back on the ground, a trader saw Mirant Corp.'s straight bonds, convertibles and bank debt a bit lower - a retreat from the recent rising trend of the bankrupt Atlanta-based energy operator's debt.

He quoted Mirant's 2½% convertible notes due 2021 unchanged at 107 bid, 109 offered," while its 5¾% converts due 2007 were a point down at 117 bid, 119 offered.

The company's 7.40% notes due 2004 fell a point to 124 bid, 126 offered, and its 7.90% notes due 2009 ended at 125 bid, 127 offered, still down a point.

The trader saw Mirant's 2003 bank debt retreat a point to 112 bid, 114 offered.

At another desk, Mirant's 2003 paper was active at 112.5 bid, 113.5 offered, basically unchanged on the day.

Delphi revolver firm, bonds weak

Delphi Corp.'s revolver was unchanged to maybe a touch higher with trades taking place right around the 98 level as people are really thinking that a bankruptcy filing is imminent, according to a trader.

A bond trader said that Delphi held the spotlight in high-yield trading. "It's the focus, as we get closer and closer to Oct. 17" - the date on which federal bankruptcy laws get tougher for companies and individuals seeking court protection from their creditors. The deadline looms over Delphi, which has warned that it could go bankrupt."

The trader said that Delphi's bonds were "active, but a little weaker," with the Troy, Mich.-based automotive electronics manufacturer's benchmark 6.55% notes due 2006 closing at 69 bid, 70 offered, down a point from Wednesday's final levels.

Another trader saw the 6.55s open at 69 bid, 70 offer, and then drop a point lower as the day wore on to 68 bid, 70 offered, and saw the company's 7 1/8% notes due 2029 likewise down a point, at 61 bid, 63 offered. He saw the two issues of 6½% notes - due 2009 and 2013 - each down two points on the session, at 64 bid, 66 offered and 63 bid, 65 offered, respectively.

Delphi's New York Stock Exchange-traded shares, meantime, lost 30 cents (12%) to end at $2.20, on volume of 20 million shares, about two-and-half times the norm.

"There was a lot of news, a lot of speculation, but nothing particularly firm to discuss," the first trader said. "They were moving up a little bit, then the union guy said we're not going to accept this [concession demand], and then S&P downgraded them."

Delphi, a former General Motors Corp. subsidiary before it was spun off in 1999, has warned that it could be forced into bankruptcy by its high labor costs, which it inherited at the GM plants it took over. It has asked its onetime corporate parent and the United Auto Worker union for help in cutting its heavy labor and pension costs, but so far, the other two parties have remained warily non-committal.

A UAW-published internal newsletter for members said that so far, GM has refused to OK the concessions Delphi said it must have.

The newsletter for UAW local 292 in Kokomo, Ind., said that "during the last two weeks of meetings, Delphi representatives have clearly stated that regardless of what the UAW agrees to, GM must provide billions of dollars in financial support or Delphi will be forced to file Chapter 11 bankruptcy" - but added that the giant automaker "has not agreed to do so at this time," it said."

From the union, Delphi wants wages for covered workers rolled back to $10 to $12 per hour, cuts in healthcare benefits, and the elimination of a jobs bank that include 4,000 idle UAW workers, who get paid even when they are on furlough.

Also on Thursday, Standard & Poor's lowered Delphi's credit rating, citing its increasing concern that the parts supplier could file for bankruptcy in the next few days. S&P lowered Delphi's already weak credit rating two notches further to CCC- from CCC+.

Collins & Aikman better

Also automotive, Collins & Aikman Corp. bonds bucked a generally softer trend in the automotive supply sector, with one trader quoting its 10¾% senior notes due 2011 at 48 bid, 50 offered, up a point on the session, while the bankrupt Troy Mich.-based interior components maker's 12 7/8% senior subordinated notes due 2012 were also up a point, at 12 bid, 14 offered.

© 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.