GM bank debt lower; asbestos bonds gain; Calpine continues climb

By Paul Deckelman and Sara Rosenberg

New York, April 5 - General Motors Corp.'s revolving credit loan paper fell off by about a point during Wednesday's session as bank debt investors continued to speculate over a possible refinancing - and wondered whether such a deal would prove successful.

However, the Detroit giant's bonds and those of its General Motors Acceptance Corp. financing arm were seen mostly unchanged. That lassitude carried over to most of the other names in the problem-plagued automotive sector.

Apart from the autos, bonds of asbestos-challenged companies such as Owens Corning and Armstrong World Industries Inc. seemed to be on fire, rising for a second consecutive session.

And Calpine Corp. notes - which were seen mostly higher on Tuesday as the bankrupt San Jose, Calif.-based power generating company announced plans to cut expenses and sell non-core assets - were again firming as the market evaluated Tuesday's news.

Bank debt traders saw GM's revolver closing out the day quoted at 94.5 bid, 95.5 offered - down from previous levels of 95.5 bid, 97 offered.

Refinancing rumors have been all over the place since the company revealed last week that it is unsure as to whether lenders would allow any borrowings under its facility due to the recent restatement of prior financial statements.

Some in the market believe that with GM's recent agreement to sell a 51% stake in GMAC a refinancing is not as necessary right now since there is ample near-term liquidity being generated from the sale. The transaction is expected to garner some $14 billion in proceeds for the carmaker, whose coffers are somewhat depleted after losing almost $11 billion last year.

On the other hand, there are those who feel that a company as big as General Motors needs to be able to draw on a line of credit even with the receipt that $14 billion, which is to be paid out over three years.

Now it appears as if the market chatter has turned to whether or not General Motors could get a new bank deal done, creating a weakening in trading levels, the trader explained.

"It's all market technicals and speculation," the trader added.

Over in the junk bond market, GM's benchmark 8 3/8% notes due 2033 were unchanged at 71.5 bid, 72 offered, a trader said, while GMAC's flagship issue, its 8% notes due 2031, were up perhaps a quarter-point.

A market source at another desk meantime saw the bonds of both entities slightly lower, with GM's 7 1/8% notes due 2013 down half a point to 74 bid, while GMAC's 6 7/8% notes due 2012 were likewise down a half, to around 93.

"There was nothing going on with GM," said another trader, who said that GMAC, and the bonds of troubled supplier companies like former GM subsidiary Delphi Corp., Dana Corp. and Tower Automotive Inc. were unchanged, at levels around 62 bid, 63 offered for Delphi, in a 75 to 77 context for Dana, and at 65 bid, 67 offered for bankrupt Novi, Mich.-based vehicular frames maker Tower - even though the latter company said it had reached an agreement with its retirees on pension and healthcare issues. Tower - like most other bankrupt or troubled companies in the automotive supply sector, is looking to sharply cut its labor costs, including the legacy cost of pensions and healthcare benefits for thousands of now-retired workers, who receive those benefits under contracts negotiated before the industry fell upon hard times. It is meantime still in talks with unions representing its current workers, on proposed wage and benefit cuts.

Calpine keeps rising

Outside of the autosphere, traders saw Calpine's bonds continuing to move up, just as they have been steadily doing for most of the past three weeks. A trader saw Calpine's 8½% notes due 2008 up ¾ point, at 60.75 bid, 61.25 offered, while another trader estimated the company's 8¾% notes due 2007 were up a full point at 63.

The market is continuing to study Calpine's Tuesday announcement in which it said it will sell 20 of its almost 100 power plants - 92 of which are operating and the rest under construction. Calpine will also close its offices in three cities and cut 775 jobs from its payroll as it sells assets and winds down construction projects. It hopes to save $100 million annually from the reductions - this on top of another $50 million of savings the company outlined in early February.

Asbestos names strong

Elsewhere, traders said that asbestos company bonds were sizzling, particularly bankrupt Toledo, Ohio-based insulation maker Owens Corning and bankrupt Lancaster, Pa.-based floorcovering maker Armstrong World Industries.

"The big names that moved were the asbestos companies," a trader declared,

He saw Owens Corning's bonds push all the way up to 87 bid, 88 offered from 81 bid, 83 offered earlier, and pegged Armstrong's bonds at 74 bid, 75 offered, up from 71 bid, 72 offered.

At another desk, a trader saw Owens Corning's 7½% notes due 2018 four points better at 87 bid, 88 offered, while Armstrong's 6½% notes due 2005 gained three points at 73 bid, 74 offered.

Yet another trader saw the Owens Corning 71/2s up five points on the day at 87.5 bid, 88.5 offered, while its 7% notes due 2009 were 5½ points better at 86.5 bid, 87.5 offered. He saw Armstrong's 6.35% notes actually down a point at 72.75 bid, 73.75 offered.

It was the second consecutive session in which the bonds of those two companies had pushed upwards by several points, this after having been largely range-bound for several weeks.

As to why those bonds were all of a sudden moving, it apparently was not due to any news coming out of Washington, where a bill that would set up a $140 billion privately funded but federally administered trust to deal with medical asbestos claims remains bottled up in the Senate.

Opponents successfully stymied that bill with parliamentary maneuverings in mid-February, and since then more pressing issues have pushed asbestos to the back burner, including the renewal of the Patriot Act, the recent flap over the Dubai Ports deal and the need to confirm two Supreme Court justices within a space of a few weeks.

However, a trader cited "rumors that there may be a settlement" of claims soon, while another suggested that the rise might be linked to news out on another member of the asbestos-challenged sector, USG Corp. The bankrupt Chicago-based building products company's New York Stock Exchange-traded shares rose $9.22 (8.81%) on Wednesday - although its bonds went nowhere - after analyst Jim Barrett of CL King & Associates raised his first-quarter and 2006 earnings estimates for the company. Barrett's research note was largely focused on the prospect of continued strong pricing and demand for the wallboard products USG makes coupled with industry capacity constraints. He did note that USG - which, like Owens and Armstrong, was driven into bankruptcy earlier in this decade by a flood of asbestos-related personal injury lawsuits - moved in January to stanch the bleeding once and for all, putting together its own $4 billion trust fund plan to handle all present and potential claims. That plan must still be approved by the courts.

And there was some activity in the courts on Wednesday for Owens Corning, with the company asking for - and receiving - a delay in the scheduled hearing on its disclosure statement. Owens cited progress that it was making in settlement negotiations with holdout creditors opposed to its reorganization plan.

That hearing was to have been held Wednesday before U.S. Bankruptcy Judge Judith Fitzgerald of the federal bankruptcy court in Wilmington, Del., which is handling most of the major asbestos-connected reorganization cases.

Owens Corning is trying to win over those dissident creditors - mostly bondholders - who object to provisions of the plan which would set recovery for most creditors at between 41 and 48 cents on the dollar.

At a hearing last week in Wilmington, Fitzgerald reportedly voiced skepticism at some of the arguments put forward by lawyers for the bondholders, who are challenging repayment guarantees made by the company's subsidiaries to its banks, who, unlike the bondholders and other unsecured creditors, stand to recover the full par value of the Owens Corning debt which they hold, assuming the company's proposed plan stands.

Refco gains

Other than asbestos, Refco Inc.'s 9% notes due 2012 were seen by a trader as having moved up to 62 bid, 64 offered from 59 bid, 61 offered previously, with another trader seeing those bonds up two points to the same 62 bid level. Neither saw any fresh market-moving news about the bankrupt New York-based brokerage company, which is in the process of liquidating various subsidiaries in order to reimburse clines left holding the bag when it filed for Chapter 11 last fall.

Among other names, a trader saw Foamex International's 9 7/8% subordinated notes due 2007 at 42 bid, 44 offered, up from 39 bid, 40 offered. Foamex is a bankrupt Linwood, Pa.-based maker of foam rubber products.

A trader saw troubled Dothan, Ala.-based home video rental and sales chain operator Movie Gallery Inc.'s 11% notes due 2012 at 45 bid, 46 offered. He called that unchanged on the day, although other market sources saw those bonds a point lower on the day, as they continue to retreat from recent high bid levels in the 49-50 area.

And Fairfax Financial Holdings Ltd.'s 7 3/8% notes due 2018 were seen having gained more than three points on the session to 82.5 bid. There was no fresh news seen out about the Toronto-based financial services company, which recently received subpoenas from the Securities and Exchange Commission, causing its bonds and its shares to slump markedly.

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