Adelphia Century Old loans lower; asbestos bonds continue slide

By Paul Deckelman and Sara Rosenberg

New York, June 8 - Adelphia Communications Corp.'s Century Old bank debt dropped off during Thursday's market hours, traders said, as investors worried over recoveries and whether they will be put in escrow.

In the bond market, debt of asbestos-challenged companies such as Owens Corning and Armstrong World Industries Inc., which had slid sharply on Wednesday on apparent investor fears that Congress may once again deadlock and fail to pass a proposed national asbestos trust fund claims mechanism, continued to backpedal. Sector investors got more bad news in the form of a new government report which also links asbestos exposure to throat cancer - which could expand greatly the pool of potential claimants who would look to the trust fund to pay their damages.

Bonds of bankrupt Linwood, Pa.-based foam rubber manufacturer Foamex International were seen little changed, despite the company's announcement of the abrupt departure of its president and chief executive officer.

Bank debt traders said that the Adelphia Century Old paper dropped as low as 94.5 bid, 95.5 offered, but managed to rebound slightly before day's end to close out the session at 95 bid, 96 offered. However, despite the slight climb in the bankrupt Greenwood Village, Colo.-based cable network operator's loans, they still ended down by a point on a day-over-day basis, since the paper went out on Wednesday at 96 bid, 97 offered.

"There are hearings that are going on. Everybody is afraid they'll get their recovery escrowed and, if they do, they're worried they'll get paid at contract rate versus what they get paid now," the trader explained.

A junk bond market source saw Adelphia's 8 7/8% notes due 2007 down a point at 91.5 bid, although its 10¼% notes due 2011 were half a point better at 53.5 bid, and most of its other bonds were unchanged on the day, including the 10¼% notes slated to come due this year, steady at 47.5 bid.

Calpine down

Elsewhere, a trader saw the bonds of the bankrupt San Jose, Calif.-based power generating company Calpine Corp. lower across the board, although he had seen no fresh news out that might explain the latest in a series of retreats.

He saw Calpine Canada Energy Finance II ULC 's 8½% notes due 2008 at 65 bid, 67 offered, a 3 point drop. The parent's 7¾% notes due 2009 were even worse, losing 4 points to end the day at 68 bid, 70 offered. Its 8¾% notes due 2007 lost 3 points to 69 bid.

Calpine's bonds have been easing all week in response to its disclosure Monday that it lost $371 million in January, according to Calpine's latest regulatory filing. It also said in a separate filing on Tuesday that it had not yet determined whether its second-priority senior notes were fully secured or whether they were under-secured. It added that it was also uncertain whether the value of the assets securing the obligations was equal to the obligations - a development which a trader said merely added to the volatility surrounding the name.

Owens Corning, Armstrong slip

On the downside, traders saw Owens Corning's bonds those of Armstrong World Industries continuing to retreat. One saw Owens Corning's 7½% notes due 2018 at 101 bid, 102 offered, and called Armstrong's 6.35% notes that were to have come due in 2003 at 75 bid, 76 offered, down 3 points on the day.

The asbestos bonds have been retreating from the high levels they hit in mid-May after Owens Corning announced an agreement among all of its creditor groups, including its asbestos claimants, but that slide accelerated this week, particularly on Wednesday, when critics of the proposed $140 billion industry-and insurance funded national asbestos trust claims mechanism attacked the proposal in a hearing before the Senate, which has yet to vote on the measure, bottled up since February.

Among these was Douglas Holtz-Eakin, the former director of the Congressional Budget Office. He warned that the asbestos fund could run out of private money, with the taxpayers left holding the bag.

The chairman of the Senate judiciary committee, Pennsylvania Republican Arlen Specter, sponsor of the current claims fund, called the ex-CBO chief's warnings about the fund plan's shortcomings "highly presumptuous," and said that he would do whatever he could to see that it is passed before the current session of Congress adjourns.

Foamex steady

Traders saw little change in the bonds of Foamex International, despite the surprising announcement that the company's president and chief executive officer Thomas E. Chorman had resigned, effective immediately. The announcement said that the decision for his exit was "by mutual agreement." Chairman Raymond E. Mabus Jr. will fill the president and CEO posts on an interim basis.

Foamex's 9 7/8% notes due 2007 were ¼ point better at 89.25 bid, as were its 13½% notes that were to have been redeemed last year. Its 10¾% notes due 2009 were at 109.75 bid, up 1/4.

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