Asbestos-related bank debt up, though bonds steady; Adelphia bonds firm on FTC decision

By Paul Deckelman and Sara Rosenberg

New York, Jan. 31 - Asbestos names were on the rise, bank debt traders said Tuesday, citing the news that USG Corp. reached an agreement to settle all of its current and future asbestos injury claims, pay its bank lenders, bondholders and trade creditors in full and emerge from Chapter 11 early in the third quarter.

However, traders said the bonds of asbestos-affected companies, which had firmed solidly on the news Monday, seemed to be pretty much unchanged to up only slightly. USG's own bonds were being quoted at firmer levels, though how much actual trading was taking place might be anyone's guess, they added.

Adelphia Communications Corp.'s bonds were seen higher, apparently helped by the Federal Trade Commission's decision to not oppose its planned acquisition by cable giants Time Warner Inc. and Comcast Corp.

USG, a bankrupt Chicago-based buildings materials company, saw its bank debt close out the day at 137.5 bid, 138.5 offered, bringing levels to about a four-point gain since the start of the week, a trader in distressed-company bank loans said.

W.R. Grace & Co., a Columbia, Md.-based provider of chemicals and materials, saw its bank debt close out the day at 136.5 bid, 137.5 offered, bringing levels to about a six-point gain since the start of the week, the trader continued.

And, Owens Corning, a Toledo, Ohio, building materials company, saw its bank debt close out the day quoted stronger at 149 bid, 150.5 offered, the trader added.

In the bond market, though, traders didn't see that much activity in the sector's bonds, which had firmed solidly on Monday following the initial release of the news about USG's plan to create a $4 billion trust that would settle all current and future asbestos-injury cases, thus clearing the way for the company to pay its other debts and emerge from Chapter 11 this summer, five years after it ducked into the bankruptcy courts after being deluged by asbestos-related medical claims - one of a number of companies to do so, including W.R. Grace and Owens Corning.

A trader in distressed issues said he saw "nothing really" going on among the asbestos bonds, although he did say that USG's bonds were being quoted higher, as the issues "tightened and moved up," with its 8½% notes that were to have come due last year moving to 142 bid, 144 offered from a wide 139 bid, 143 offered, while its 9¼% notes that were to have matured in 2001, moved up to 145 bid, 147 offered from a wide 142 bid, 146 offered. However, he cautioned that these were "just quotes," with little actual trading going on.

Another trader actually saw USG's 9¼% notes "down a touch," quoting the bonds at 136.75 bid, 137.25 offered, down from 137 bid, 138 offered.

He meantime saw Owens Corning's 7% notes due 2018 perhaps half a point better at 90.5 bid, 91.5 offered, while bankrupt Lancaster, Pa.-based floorcovering maker Armstrong World Industries Inc.'s 9% notes were half a point better at 83 bid, 84 offered.

Adelphia stronger

Apart from asbestos, traders saw some movement in Adelphia Communications, after the as the FTC gave the green light to the proposed $17.6 billion acquisition of the bankrupt Greenwood Village, Colo.-based cable operator by industry giants Time Warner and Comcast.

A trader saw the company's 10¼% notes due 2006 about a point better on the day at 64 bid, 66 offered, while its 10¼% notes due 2011 were also up a point at 68 bid, 70 offered.

Another trader saw those 2011 bonds at 69.5 bid, 70.5 offered, up two points on the session and three points over the past two sessions.

At another desk, a trader pegged the company's 9 7/8% notes due 2007 at 67 bid, up from prior levels in the lower 60s. However, another market source only saw those bonds up three points on the day at 67.

Adelphia's bonds - which have recently been rising anyway - were seen benefiting from Tuesday's decision by federal antitrust regulators to allow the huge acquisition deal to go through. The Federal Trade Commission closed its investigation into the deal without taking any action, following a seven-month probe of the planned transaction.

Adelphia slid into bankruptcy in 2002 amid allegations that the company's founder, John J. Rigas, and members of his family who occupied senior management positions there, had diverted millions of dollars of company money into their own investments, leading to the ouster of those family members from their positions and their later prosecution.

Last spring, Adelphia accepted the $17.6 billion offer made by Time Warner and Comcast, the nation's second- and first-largest cablers, respectively. Under the terms of the deal, Adelphia's far-flung network of local cable systems will be divided up between the two giants, with Time Warner getting the crown jewels of the acquisition, Adelphia's Los Angeles-area cable systems. The FTC ruled that the proposed transaction is not likely to likely to "substantially lessen competition in any geographic region in the United States."

The purchase of Adelphia must still be approved by the Federal Communications Commission.

Prior to the FTC approval, Adelphia's bonds had already been moving up slowly but surely. The 9 7/8% notes due 2007, for instance, had been down around the 59 level on Jan. 10, moving up from there in small increments.

The bonds got a boost last week on market speculation that Adelphia was in talks with the holders of its Arahova Communications Corp. (formerly Century Communications Corp.) bonds aimed at settling outstanding issues between them. That followed a federal bankruptcy judge's refusal to appoint a trustee to oversee disputes, as the Arahova bondholders had requested; the judge said that might put the whole merger into possible jeopardy.

Auto names steady

Elsewhere, things were seen fairly quiet in autoland. A trader in distressed notes said that "nothing" was happening in such bankrupt auto parts supplier names as Collins & Aikman Corp., Delphi Corp. Or Tower Automotive Inc. - with the latter name having apparently stabilized after taking a tumble on Monday on the news that a solid majority of the Novi, Mich.-based vehicle frame maker's hourly employees had voted to give their unions strike authorization - meaning the unions could call a walkout should the federal bankruptcy judge overseeing the company's re-organization go along with management's request to void the current union contracts and impose lower wages and lesser benefits.

A trader at another desk agreed, seeing Tower's 12% notes due 2013 unchanged at the 72.5 bid, 73.5 offered levels to which those bonds had fallen on Monday.

Among other problem-plagued automotive names, he saw Remy International's 8 5/8% notes due 2007 unchanged at 82.5 bid, 83.5 offered, although he saw Dana Corp.'s 5.85% notes due 2014 up ¾ point at 68.25 bid, 69.25 offered. Toledo, Ohio-based systems maker Dana recently showed the financial markets by reporting a whopping $1.27 billion quarterly loss.

A trader said that General Motors Corp. bonds - which had firmed solidly on Friday and again on Monday, first on rumors of progress in its efforts to sell a 51% stake in its General Motors Acceptance Corp. financial unit, and then on weekend news reports identifying two potential bidder groups interested - were not much moved on the session Tuesday; he saw them at 73.5 bid, 74.5 offered, up perhaps half a point on the day, while the GMAC 8% notes due 2031 were unchanged on the session at 101 bid, 102 offered.

Other automotive names were seen unchanged to perhaps a quarter-point higher, with a trader at another shop pronouncing the GM and GMAC bonds unchanged on the day and Ford Motor Co.'s 7.45% notes due 2031 up ¼ point at 73.25 bid, 74.25 offered. He saw Ford's credit division's 7% notes due 2013 also a quarter-point better, at 90.25 bid, 91.25 offered.

Former Ford parts subsidiary Visteon Corp.'s 8¼% notes due 2010 were unchanged at 84 bid, 84.75 offered, he said, while bankrupt ex-GM subsidiary Delphi Corp.'s 6.55% notes due 2006 were at 56.75 bid, 57.75 offered, and its 7 1/8% notes due 2029 were at 57.5 bid, 58.5 offered, both unchanged on the day.

Refco unchanged

Also on the distressed desks, Refco Inc.'s 9% notes due 2012 were seen unchanged at the same 64 bid, 65 offered levels to which the bankrupt New York-based financial services company's bonds had recently fallen, from levels 10 points higher.

And a trader saw "nothing doing" in the bonds of bankrupt airline operators Delta, Northwest, United and ATA. The latter company expects to emerge from bankruptcy in late February, with unsecured creditors getting 7% of the company's stock.

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