Star Gas bonds firm as shareholder seeks CEO ouster; Owens Corning bank debt continues rise

By Paul Deckelman and Sara Rosenberg

New York, Feb. 15 - Star Gas Partners LP's battered bonds - which had fallen as low as the upper 80s from prior levels above par - were seen to have regained some ground Tuesday, possibly in connection with a move by one of the Stamford Conn.-based heating oil distributor's larger stockholders to get rid of the company's chief executive officer, whom he blames for its lackluster financial performance. The same investor is also trying to oust the CEO of the underperforming Salton Inc.

In the bank loan market, Owens Corning's debt moved up again, despite the lack of any definitive news on the outcome of the recent bankruptcy court hearing on the issue of substantive consolidation ruling.

A market source saw Star Gas as one of his big movers on the day, with the 10¼% notes due 2013 quoted as high as 96 bid, up some 5.5 points on the session.

At another desk, a less pronounced rise was seen, with the bonds "a little better" at 92.375 bid, 93 offered, up from 90.75 bid, 91.75 offered.

Yet another trader saw the Star Gas notes firming to 92 bid, 93 offered from 89 bid, 90 offered.

However, he expressed skepticism that the rise in the bonds might be linked to an effort by investor Daniel Loeb, who heads the Third Point LLC hedge fund, to dump Star Gas CEO Irik Sevin, whom Loeb said had committed "strategic blunders" that helped to depress the company's recent financial results.

Loeb sent a vitriolic letter to Sevin, demanding his immediate resignation and the return of his company car, and also seeking the resignation of Sevin's 78-year-old mother from the company's board of directors.

Noting that his fund holds a 6% partnership unit stake in Star Gas, making it the single largest partner, Loeb said in his letter that "since your various acquisition and operating blunders have cost unit holders approximately $570 million in value destruction, I cannot understand your craven stance with respect to shareholder communications. We urged you to hold a conference call to discuss the company's plight and to set forth a plan of action."

He also said that "sadly, your ineptitude is not limited to your failure to communicate with bond and unit holders. A review of your record reveals years of value destruction and strategic blunders which have led us to dub you one of the most dangerous and incompetent executives in America."

Sevin, he said, had won himself "a dazzling place in the firmament of bad management."

Salton unchanged

Loeb also dispatched a similarly nasty letter to the CEO of troubled Salton Inc., Leonhard Dreimann, after the Lake Forest, Ill.-based maker of the George Foreman hamburger grills and other small appliances. Salton said last week that quarterly profit plunged 77%, as delays in shipments from suppliers crimped sales in the key holiday season, and said it was considering alternatives for refinancing debt but still had no firm plan in mind.

But Salton's bonds did not rise on the news of the campaign to unseat its management; its 10¾% notes coming due this December were at 83 bid, 84 offered, while its 12¼% notes due 2008 were at 68 bid, 69 offered, both unchanged on the day.

Owens Corning loans gain

In bank loan dealings, Owens Corning's paper was seen closing out the day higher by about a point to 1½ points at 107.5 bid, 108.5 offered, according to a trader.

Owens bank debt had been in the spotlight all last week, rallying about 17 or 18 points between last Monday morning and last Wednesday evening on news that the hearing on substantive consolidation had ended Monday afternoon.

Last Thursday and Friday, the bankrupt Toledo, Ohio building materials company's paper finally started to settle in a little, moving to 105 bid, 106 offered from highs of around 107 bid, 108 offered.

The hearing pits the interests of the company's bank debt holders against those of its bondholders and other credits, with the bank debt people seeking special preference for their holdings and the bondholders trying to collapse all of the company's obligations into a single pool.

Owens Corning bonds meantime were seen "moving up," a trader said, to 65 bid, 67 offered, up a point or two.

Also up were the bonds of Armstrong World Industries, the Lancaster, Pa.-based floorcovering maker which, like Owens Corning, had been driven into bankruptcy to escape a flood of asbestos-related lawsuits. The Armstrong bonds were seen having firmed to 68 bid, 70 offered.

Winn-Dixie recovers a little

Elsewhere in the bond pits, Winn-Dixie Stores Inc.'s 8 7/8% notes due 2008 - which had swooned down to the mid-60s over several sessions, off well over 20 points, on poor quarterly numbers from the Jacksonville, Fla.-based supermarket company, were seen having recovered about two points on the session to close at 66 bid, 67 offered.

Tower Automotive Inc.'s 5.75% convertible bonds came in about 1 point in quiet trade Tuesday as its bankruptcy slowly progresses. A trader pegged the issue at the end of the day at 17.5 bid, 18.5 offered, but then added, the bid might be as high as 17.75. Meanwhile, the Tower Automotive convertible preferreds were at 1.65, just ahead of the stock at 27 cents.

"They [convertibles] have gotten very quiet," a sellside trader said. "The real issue in there's a meaningful diversion of opinions. On the bid side, those people believe the intercompany claims will give them some standing. There's just as many on the other side who disagree."

Tower, the Novi, Mich.,-based maker of auto parts, filed bankruptcy on Feb. 2 and the event stilled much of the activity in the company's bonds.

Tower's 12% notes due 2013 meantime were seen down about a point at 62 bid, 64 offered.

Trump notes higher

Trump Hotels & Casino Resorts Inc.'s controversial reorganization plan for the bankrupt Atlantic City, NJ.-based gaming company won court approval for revisions to the plan, setting the stage for a confirmation hearing in late March. The judge did take into account some shareholder objections to the plan, particularly their criticism of the fat salary that originally was to have been paid to company chairman Donald J. Trump.

The Trump A.C. 11¼% notes due 2006 firmed two points, to 98 bid, 99 offered, while the company's 12 5/8% notes due 2010 were a point better, at 112 bid, 113 offered.

Mirant gains

And a trader saw Mirant Corp.'s bonds better, with the Mirant Corp. 7.40% notes about two points higher at 78 bid, 79 offered, and its busted 2½% convertibles 1½ points better at 75 bid, 76 offered.

Mirant's 2003 bank paper was also active on Tuesday, with levels moving up by 1½ points on the day to 73.5 bid, 74.5 offered, a trader said.

No news was seen having sparked the bankrupt Atlanta-based energy company's gains.

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