GM, Delphi not helped by hefty buyout results; Owens Corning up on bankruptcy case developments

By Paul Deckelman and Sara Rosenberg

New York, June 26- The news that over 47,000 hourly employees at troubled General Motors Corp. and its bankrupt former subsidiary, Delphi Corp. had accepted incentives to leave brought sighs of relief to those companies, which looked to cut their heavy labor costs by offering early-retirement buyouts to members of their unionized workforce. However, it didn't do very much for investors in the companies' bonds, which were seen on the downside Monday, as the news came too late in the session to have any positive impact.

Elsewhere, much of the activity in an otherwise quiet junk bond secondary market was seen in such distressed names as Adelphia Communications Corp., Owens Corning and Fairfax Financial Holdings Ltd., all of which were seen having firmed a bit. Adelphia and Owens Corning were seen carrying over the momentum they'd built up at the end of last week on respective favorable news about the companies, while Fairfax was merely seen bouncing back from an oversold condition after having gotten clobbered.

Bond investors did not seem much impressed by the good news coming out of Detroit Monday. Although it was known during the trading hours that GM would hold a late-afternoon briefing at which it would outline the results of its employee buyout campaign, and it was generally known that the campaign had been going well, the actual results came way too late to have any impact on trading - and the bonds of both GM and Delphi ended lower, although the numbers could conceivably give them a boost in Tuesday's dealings a market source said.

The source pegged GM's flagship 8 3/8% notes due 2033 down ¼ point on the day at 74.5 bid, 75.5 offered, although another source saw GM's bonds down even more, calling their 75.5 bid, 76.5 offered finish a 1 point drop.

That source also saw GM unit General Motors Acceptance Corp.'s 8% notes due 2031 at 92.5 bid, 93.5 offered, down half a point on the day.

A trader at another desk meantime saw Delphi's 6.55% notes due this year 81.5 bid, 82.5 offered, unchanged on the day, while its 6½% notes due 2013 were off ¾ point at 75.25 bid, 76.25 offered.

GM and Delphi announced late in the day that some 35,000 GM hourly employees had accepted the auto giant's offer of lump-sum buyouts to take early retirement, which would bring its unionized hourly workforce down to about 78,000 from 113,000 at present. Troy, Mich.-based automotive components manufacturer Delphi said 12,600 of its 23,000 hourly employees represented by the United Auto Workers' union accepted the company's buyout offer, which will be funded in large part by former corporate parent GM. Delphi, desperately seeking to cut labor costs as it reorganizes under Chapter 11, hopes to offer similar buyouts to its roughly 10,000 hourly workers represented by unions other than the UAW.

Other automotive names also made no progress on Monday, such as bankrupt Toledo, Ohio-based parts maker Dana Corp., whose 6½% notes due 2008 ended at 83.25 bid, 84.25 offered, while its 5.85% notes due 2015 closed at 74 bid, 75 offered, each unchanged on the day.

Movie Gallery slips

Apart from the auto names, a trader saw Movie Gallery Inc.'s 11% notes due 2012 "a little easier," off a point on the day at 72 bid, 74 offered.

Owens Corning strong

Meanwhile, a trader saw Owens Corning's 7½% notes due 2018 push up by three points to 84 bid, 86 offered, while the bankrupt Toledo, Ohio-based insulation maker's 7% notes due 2009 were up "about two or three points" to 82 bid, 84 offered. Another trader saw the company's 7½% notes that were to have come due last year at 85.25 bid, 86.25 offered, which he said was a 2 point gain in the name.

The bonds got a boost from Friday's news that the bankruptcy court overseeing its reorganization had approved an agreement between the company and major creditor groups such as bondholders, trade creditors, asbestos claimants and shareholders, who will support the company's proposed reorganization plan.

The deal was approved by judge Judith Fitzgerald of the U.S. Bankruptcy Court in Wilmington Del., where the company filed for Chapter 11 protection nearly six years ago, pushed into bankruptcy under deluge of thousands of asbestos injury-claim lawsuits.

The global settlement, first announced in late May and finally approved last week by Fitzgerald at a hearing in Pittsburgh, ended the threat of continued litigation that could have kept the company mired in bankruptcy for additional years. At this point, Owens Corning envisions an exit from Chapter 11 later this year, perhaps as early as Oct. 31.

Armstrong higher

A trader said that Armstrong World Industries Inc.'s bonds were up two points to 72.5 bid, 73.5 offered, although at another desk, a trader called them unchanged. The bonds of the Lancaster, Pa.-based floorcovering maker - which was driven into bankruptcy like Owens Corning, under a flood of asbestos-related lawsuits - frequently rise and fall in tandem with Owens Corning's securities.

Adelphia, Century better

Most of the other real activity in the junk market also seemed to come out of the distressed-debt segment.

"Not a heck of a lot was going on" in general, one trader said, although he did note that "there was some life in Adelphia and in Century" Communications Corp., an Adelphia subsidiary. He quoted the former's 10¼% notes due 2011 up 1½ points at 57 bid, 58 offered, while the Century 9½% notes that were due in 2005 were likewise up 1½ points, at 96 bid, 97 offered, "continuing the momentum from last week," when Adelphia's bonds, and those of its unit, rose in response to the news that the bankrupt Greenwood Village, Colo.-based cable operator had received the approval of the U.S. Bankruptcy Court for the Southern District of New York for an expedited process for the sale of its assets to rivals Comcast Corp. and Time Warner NY Cable, had accordingly amended the agreements under which its cable systems will be bought by the two cable giants, and had filed a modified plan of reorganization, hoping to assuage the concerns of some of its bankruptcy constituents about the process.

At another desk, a market source saw Adelphia's 9 7/8% notes due 2007 up a point at 54.

Fairfax higher

And a trader saw what he described as a "dead-cat bounce" in Fairfax Financial Holdings' bonds, its 7¾% notes due 2012 up two points at 82 bid, 83 offered. On Friday, they had fallen three points - and a trader said they lost a whopping nine points on the whole week.

The Toronto-based financial services company has struggled lately, and has been accused of securities fraud by the plaintiffs in a class-action suit. It said Friday that Fairfax Financial Holdings said on Friday that it was not aware of any corporate developments to explain why its shares have fallen to their lowest level in more than three years.

"They did little to reassure investors," the trader said.

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