Adelphia bank debt moves up; Owens Corning, other asbestos names bounce; Solutia eases

By Paul Deckelman and Sara Rosenberg

New York, May 23- Adelphia Communications Corp.'s bank debt was on the rise Tuesday, traders in that market said, as banks are now optimistic that their recoveries will not be put in escrow since a hearing on the matter was adjourned on Tuesday.

Also seen moving up were the bonds of such asbestos-challenged issuers as Owens Corning and sector peers Armstrong World Industries Inc. and Federal-Mogul Corp. Owens Corning's notes were seen up as much as three points, as the sector - whose bonds and shares have recently been getting smacked around on profit taking off hefty earlier gains - seemed to have bounced back a little from their oversold condition.

A bank loan trader, commenting on the firming in the Adelphia paper, observed that "people believe there will be a settlement and banks will not have to keep their money in escrow. Banks want to be paid as quickly as possible so [trading] levels are definitely higher."

The bankrupt Greenwood Village, Colo.-based cable systems operator's Century Old and Century New bank debt closed out the session quoted at 97.25 bid, 98.25 offered, up about a point on the day from previous levels of 96.25 bid, 96.75 offered, the trader said.

And the company's Olympus bank debt closed out the day quoted at 97 bid, 97.75 offered, up about half a point from previous levels of 96½ bid, 97 offered, the trader added.

Over on the bond side of the fence, however, a market source saw Adelphia's 9 7/8% notes due 2007 down about half a point, around the 49 bid level. A trader at another desk, however, said he had seen no activity in Adelphia's bonds.

Solutia bonds move down

Elsewhere, the second trader saw Solutia Inc.'s subordinated bonds - which had firmed several points on Friday and which had held those levels Monday on the news that the bankrupt St. Louis-based chemicals maker had moved to shore up revenues by raising prices on several key products across the board - heading lower in Tuesday's trading. He saw its 6.72% notes and its 7 3/8% notes down about a point at 93 bid, 95 offered.

Asbestos names higher

The big movers in distressed-land, however were the asbestos names - which up until Tuesday had been getting clobbered over the last week, moving down from their recent hefty gains.

Bankrupt Toledo, Ohio-based insulation maker Owens Corning, whose 7½% bonds due 2018 had gotten as high as 123 bid earlier in the month before gradually withdrawing to lows around 107 Monday, were seen at 110 bid, 112 offered Tuesday.

A trader also saw the company's 7% notes due 2009 at 108 bid, 110 offered, also up three points on the day, while bankrupt Lancaster, Pa.-based floorcovering maker Armstrong's bonds were also three point gainers, back up to 81 bid, 83 offered. Bankrupt Southfield, Mich.-based automotive parts maker Federal Mogul, another asbestos name, was two points better at 61 bid, 62 offered.

Owens Corning's bonds had jumped earlier in the month to its exalted bid levels above 122 from levels around par, after the company announced that it had reached an agreement with its asbestos claimants and various other creditor groups on a reorganization plan that would bring Owens Corning out of bankruptcy this year, six years after it went in.

The plan would set up a trust fund mechanism that would pay out as much as $5 billion in claims over the next several years, following the example earlier this year of yet another asbestos name, bankrupt Chicago-based building products maker USG Corp.

The bonds of Armstrong and Federal-Mogul - each like Owens Corning driven into Chapter 11 by a deluge of asbestos-related lawsuits - had risen solidly in line with the latter company's notes, with Armstrong's bonds pushing into the low 90s and Federal-Moguls into the upper 60s, well above the levels that each held before news of the Owens Corning settlement.

But the bonds of all three began retreating last week, with traders chalking the movement up to profit-taking from the recent gains.

On Tuesday, a trader said that the bonds were bouncing back because the sell off had been "overdone."

Delphi rises

In the automotive realm, a trader saw the bonds of bankrupt Troy, Mich.-based parts supplier Delphi Corp. higher, although he had seen no news out about the company. He quoted Delphi's 7 1/8% notes due 2029 up 1½ points at 75.5 bid, 76.5 offered, and its 6.55% notes slated to come due later this year at 76.75 bid, 77.75 offered.

He also saw bankrupt Toledo-based parts maker Dana Corp. "all over the place," its 5.85% notes due 2015 down a point at 76.5 bid, 77.5 offered, but its 6½% notes due 2008 up ¼ point at 84.5 bid, 85.5 offered.

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