Asbestos bank debt, bonds up; Calpine rebounds; autos steer higher

By Paul Deckelman and Sara Rosenberg

New York, April 19 - Bank debt of asbestos-related companies was firmer pretty much across the board on Tuesday as the Senate Judiciary Committee met to consider legislation aimed at once and for all settling the asbestos litigation crisis that has sent dozens of companies into bankruptcy over the last few years. The bonds of one of those companies that sought Chapter 11 - Armstrong World Industries Inc. - were also seen trending higher.

Also in bond-trading action, Calpine Corp. - which had received a solid drubbing over the previous two sessions on an investor's bad reaction to the San Jose, Calif.-based power generating company's planned sale of a British power plant - were seen having bounced back smartly.

Also bouncing back were bonds of the battered automotive supply sector, being towed along by General Motors Corp.'s notes, which came off their early lows to finish a little higher on the day, traders said, after the world's largest automaker posted a big quarterly loss - but one which was in line with previously announced earnings warning and contained no real surprises.

The news out of Washington on the asbestos bill helped to "get people's hopes up that something will get done on the legislation," according to a trader.

Armstrong's bank debt was quoted at 85 bid, 88 offered, up about two points, while the Lancaster, Pa.-based floor, ceilings and cabinet company's bonds were seen by a junk trader as having opened around the same 84 bid, 86 offered level to which they had firmed on Monday. Then, he said, the bonds got as good as 89 during the session, before dropping back to end at 86.5 bid, 87.5 offered, still better than two points higher on the day.

Bankrupt Toledo, Ohio-based insulation maker Owens Corning's loan paper was quoted at 115 bid, 116 offered, up about one point; however, the bond trader saw its notes firm to 84 bid, 86 offered from 82 bid, 84 offered, but then give up all the gains to close at the same level at which they had started.

Bankrupt Chicago-based buildings materials maker USG Corp.'s bank debt was quoted at 122 bid, 123 offered, up about half a point, the loan trader said.

Those companies' bank debt and/or bonds could be in a position to push still higher on Wednesday, on the news - long after trading had concluded for the day-that the bill's primary sponsor, Judiciary Committee chairman Sen. Arlen Specter, R-Pa., had finally formally introduced his long-awaited measure setting up the $140 billion compensation fund - this despite objections to parts of the plan by fellow Republicans on the committee.

Specter had been meeting with his fellow GOPers over a series of days, in hopes of convincing them to climb aboard and endorse his bipartisan bill, which has the support of the ranking Judiciary Committee Democrat, Sen. Patrick Leahy, D.-Vt.

The aim of the bill is to create a fund from which people who were medically harmed by their exposure to asbestos - widely used as a fireproofing material by industry for decades before the discovery of its cancer-causing potential - can be paid, thus removing such claims from the nation's court system.

However, some of the GOP senators are unhappy with Specter's bill, echoing concerns voiced by the asbestos-challenged companies and their insurers that setting up the fund might not finally cap their asbestos liability - and would still potentially leave them on the legal hook for billions of dollars. A number of insurers recently voiced their opposition to the concept of the claims fund.

On the Democratic side, there has also been some grousing, to the tune that the $140 billion fund is not big enough to pay all claims fairly, the $1.1 million maximum payout to survivors of people who died of mesothelioma is not big enough, and the provisions capping the amount of award money that can go to the trial lawyers will hurt a key Democratic constituency.

Specter acknowledged that not everyone supports his bill, but said he aims to resolve the differences and get the bill voted out of committee on April 28.

Adelphia loans higher

Elsewhere, Adelphia Communications Corp.'s bank debt was better bid as news came out that Cablevision Systems Corp. upped its all-cash bid to $17.1 billion from $16.5 billion, according to a trader.

The bankrupt Greenwood Village, Colo.-based cable operator's Century Old bank debt was quoted at 99.5 bid, par offered and the Century New bank debt was quoted at 99.375 bid, 99.875 offered, with both tranches higher by about an eighth to a quarter of a point on the day, the trader said.

A bond trader, however, said that the company's notes, "if anything, were down a point" on the news, with the 10¼% notes due 2011 dipping to 94.5 bid, 95.5 offered and its 10¼% notes due 2006 easing to 89 bid, 91 offered.

The Wall Street Journal reported Tuesday that Bethpage, N.Y.-based cable operator Cablevision had upped its bid for Adelphia to $17.1 billion - but did not say whether this was all cash, like its previous $16.5 billion bid, or also included some stock.

Cablevision is still seen as a long shot to acquire Adelphia, which has already made a preliminary agreement with cable giants Time Warner and Comcast, whose cash and stock bid for Adelphia is estimated at close to $18 billion.

During the day, Adelphi itself confirmed that view in documents unsealed by the U.S. Bankruptcy Court for the Southern District of New York. It asked the court to give it authority to finalize its sale agreement with Time Warner and Comcast and said that that bid was the best choice.

Calpine rebounds

Calpine Corp.'s bonds "bounced a little off their lows," a trader said, pegging its 8¾% notes due 2007 at 71 bid, 72 offered, up from 68 bid, 69 offered previously, and its 10½% notes due 2006 likewise stronger at 95 bid, 96 offered.

"Calpine was firm today," said another trader, who quoted its 8½% notes due 2008 half a point higher, at 62.5 bid, 63.5 offered.

Another trader though, characterized the bonds as "kinda stable," although he did see the 81/2s up a point at 62 bid, 64 offered.

The company's bonds had been whacked down over the previous two sessions after a big bondholder voiced concerns that Calpine's planned sale of its Saltend plant in Britain would leave the unit selling the plant unable to meet the obligations on its bonds.

Calpine issued a statement asserting that the company would still be in full legal and financial compliance with the terms of the bonds' covenants.

Auto names rise

Auto names were seen better, after GM's first-quarter results turned out to be bad - but no worse than previously forecast.

Collins & Aikman's issues, for instance, "were up a couple of points," a trader said, quoting the Troy, Mich.-based automotive components company's 10¾% senior notes due 2011 as having risen to 77 bid, 78 offered, from prior levels at 75.5 bid, 76.5 offered, while its 12 7/8% subordinated notes due 2012 were two points better, at 39 bid, 40 offered.

Another trader saw those same bonds up only about a point, at 76 bid, 78 offered, and 38 bid, 40 offered, respectively.

He also saw the 12% bonds due 2013 of bankrupt Novi, Mich.-based vehicle frames maker RJ Tower Corp. up a point at 54 bid, 56 offered.

In fact, he said, "most of the autos firmed except EaglePicher." He saw the bankrupt Phoenix-based industrial manufacturer's 9¾% notes at 65 bid, 67 offered, unchanged on the session.

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