Owens Corning, asbestos upturn fizzles; Adelphia trades mostly higher

By Paul Deckelman and Sara Rosenberg

New York, May 24 - The bounce seen Tuesday in the bonds of Owens Corning and fellow asbestos-challenged issuers such as Armstrong World Industries Inc. proved to be short-lived, traders said Wednesday, with all three issuers' notes retreating after having blipped up a little in the previous session.

Elsewhere, Adelphia Communications Corp.'s bank debt continued to be active during Wednesday's market hours, trading stronger at various points in the day. However, traders said, those early gains faded and the paper finished basically unchanged relative to the session before.

A trader in distressed bonds saw Owens Corning's 7½% notes due 2018 retreating to 108 bid, 110 offered from Tuesday's closing levels at 110 bid, 112 offered. He saw the bankrupt Toledo, Ohio-based insulation maker's 7% notes due 2009 also down two points, at 106 bid, 108 offered.

Those notes had been up as much as three points in Tuesday's activity after having previously gotten whacked over several sessions on profit taking off hefty gains notched earlier in the month.

He saw the bonds of bankrupt Lancaster, Pa.-based floorcovering maker Armstrong also down two points on the day, at 79 bid, 81 offered.

In the bank debt market, Adelphia's paper continued to be active, trading stronger at various points in the day before going out at basically unchanged levels, according to a trader.

The bankrupt Greenwood Village, Colo.-based cable operator's Century Old bank debt and the Century New bank debt both saw bids get as high as 97.75, but then settled back down to 97.25 bid, 98 offered on the Olds and 97 bid, 98 offered on the News, the trader said.

Meanwhile, the Olympus bank debt traded as high as 97.5 before settling back down to 96.75 bid, 97.25 offered, the trader added.

The recent spark in trading volume and strengthening of trading levels has been linked to the adjournment of a hearing on Tuesday that involved banks' recoveries and whether they would be put in escrow or not.

The adjournment has left investors with the belief that the money will not go in escrow and, therefore, that they will get paid sooner rather then later.

Adelphia's 10¼% notes due 2006 were seen unchanged at 48 bid, 50 offered, and its 10½% notes due 2011 were also steady at 52 bid, 54 offered.

A trader saw Refco Inc.'s 9% notes due 2012 down three points at 75 bid, 76 offered, but had seen no fresh news on the bankrupt New York-based brokerage and trading company to explain the retreat.

Delphi edges up

In the automotive sphere, investors were keeping an eye on the newswires for any developments coming out of New York, where Delphi Corp. once again requested that the federal judge overseeing the Troy, Mich.-based automotive parts supplier's bankruptcy proceedings allow it to void its labor contracts, which would clear the way for imposition of a more affordable wage schedule - but which also would make a strike against the company that much more likely. Judge Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York is not expected to rule on the company's motion before late June, at the earliest.

A trader saw Delphi's 6.55% notes slated to come due this year at 77.25 bid, 78.25 offered and its 7 1/8% notes due 2029 at 76 bid, 77 offered, both up half a point. Another trader, however, said that he saw the company's bonds going nowhere.

The first trader also saw the benchmark 8 3/8% notes due 2033 issued by Delphi's former corporate parent, General Motors Corp., up ¼ point at 73.75 bid, 74.75 offered, while the 8% notes due 2031 of the Detroit-based auto giant's financial arm, General Motors Acceptance Corp., were also up 1/4, at 92.75 bid, 93.75 offered.

GM, fearing that a strike against Delphi, its biggest parts supplier, would badly disrupt its production at a time when the giant carmaker needs to get back on track, sales-wise and financially, had unsuccessfully petitioned the court to postpone Wednesday's hearing on Delphi's motion, saying the session should be delayed by 60 days in order to give GM, Delphi and the latter's union more time for negotiations aimed at reaching a consensual solution to the company's problems.

At that session, lawyers for Delphi's labor unions and other stakeholders insisted that the troubled parts supplier's results have been running ahead of expectations, producing a bigger financial cushion than company officials admit, and thus should not be given leeway to junk its current labor contracts. Their point was emphasized when a Delphi executive - chief restructuring officer John Sheehan - acknowledged in his testimony that the company has about $3.6 billion in available liquidity, including $1.9 billion in cash and $1.7 billion in bank credit.

Delphi - which was spun off by GM in 1999 - contends that the costly labor contracts with the United Auto Workers and several other unions were a key factor in driving the company into bankruptcy last fall, and says it must lower its labor costs if it is to survive. Delphi wants to cut its hourly workers' wages from an average of $27 an hour to $16.50 an hour - but that's only if GM agrees to pay a part of that, and so far, it has not. Without a GM contribution, Delphi is willing to go no higher than $12.50 an hour on average - a level which the unions say is absolutely unacceptable. Their rank and file of about 34,000 employees voted to give their respective union leaders the authority to call a strike should Drain rule in favor of Delphi and the company then attempt to unilaterally impose the lower wage scale.

GM has already offered to pay for buyouts for up to 13,000 Delphi workers and to hire another 5,000, but at least for now has apparently drawn the line against directly subsidizing a portion of the wages of the remaining Delphi workers.

The carmaker is involved because it is trying to head off a repeat of a lengthy strike several years ago at Delphi, which cost it hundreds of millions of dollars in lost production.

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