Asbestos bonds continue slide, Armstrong loans also; Delphi retreats

By Paul Deckelman and Sara Rosenberg

New York, June 13 - Bonds of asbestos-challenged companies were seen continuing their recent retreat Tuesday, headed by Owens Corning, the bankrupt Toledo, Ohio-based insulation maker, which had led the sector up strongly not very long ago - but which is now leading it just as steeply back down. Bonds of sector peers Armstrong World Industries Inc. and Federal-Mogul Corp. were also lower, and traders in the bank debt market noted a sharp fall in Armstrong's paper as well.

Elsewhere, bonds of bankrupt Troy, Mich.-based auto parts maker Delphi Corp. - recently a source of strength to the auto sector, following the news of its agreement with its largest union and with former corporate parent General Motors Corp. on an expanded worker buyout plan - finally ran out of gas on Tuesday, and were seen solidly lower, as were the bonds of a number of other names in the troubled auto parts sector, such as Dana Corp. and Dura Operating Corp. However, GM's own bonds, oddly, were seen continuing to "hang in there" Tuesday, in the words of one trader, with most of the Detroit giant's issues pretty much unchanged, or maybe even up a little.

The bonds of newly-bankrupt ladder manufacturer Werner Holding Co., which had fallen sharply on Monday when the Greenville, Pa.-based company entered Chapter 11, were seen down several additional points on Tuesday.

The company's 10% notes due 2007, which on Monday had fallen to levels around 20 bid from prior levels around 31 on the news of the filing with the U.S. Bankruptcy Court in Wilmington, Del., retreated further Tuesday to around 17 bid, 19 offered.

Werner, one of the largest manufacturers of metal ladders in the country, said Tuesday that judge Kevin J. Carey approved all of its first-day motions, which will allow Werner to continue to operate in the normal course of business during the reorganization process. The company was also granted interim access to its $99 million debtor-in-possession funding facility with Black Diamond Commercial Finance.

Back among companies which have already been in reorganization for some time, bank loan traders saw Armstrong World Industries' debt fall off by about two points during Tuesday's session, as the distressed loan market in general felt weaker in sympathy with high yield and equities being off, according to a trader.

The Lancaster, Pa.-based floor, ceilings and cabinet company's bank debt closed out the day quoted at 69 bid, 71 offered, down from previous levels of 71 bid, 73 offered, the trader said.

"High yield started lower. Stock markets overseas got crushed. U.S. stock market was down. Things just didn't feel good in other markets, so we were lower," a second trader remarked.

"It's a macro theme. Not credit specific. Everything felt weaker," the second trader added.

Meanwhile, Armstrong's bonds, and those of Federal-Mogul were off solidly, and Owens Corning's notes positively swooned, junk bond traders said.

Those bonds have all been steadily falling for some two weeks now, on a combination of profit-taking off hefty earlier gains, plus investor angst over whether Congress will ever in fact pass a bill setting up a proposed $140 billion industry- and insurance-funded claims mechanism to settle the asbestos-related medical lawsuits that have driven companies like Owens Corning, Armstrong and bankrupt Southfield, Mich.-based automotive parts maker Federal-Mogul into Chapter 11.

On Tuesday, the carnage continued, with Owens Corning's flagship 7½% notes due 2018 plunging to 87.125 bid from prior levels around 95.75, a market source said, and its 7% notes due 2009 dropping a point to 93.5. At their peak levels in late May, after the company announced an agreement with its asbestos claimants and other creditor groups on the shape of a reorganization plan, those notes were trading above 120 bid. Its 7.70% notes due 2008, which just recently were at 105, finished down "several" points Tuesday at 86.75, a source said.

Armstrong's bonds fell to 68 bid, 70 offered from 71 bid, 73 offered Monday, another trader said, while Federal-Mogul's notes were a point easier at 58 bid, 60 offered.

Auto names slip

Other bankrupt automotive names were also struggling on Tuesday, such as Troy, Mich.-based interior components manufacturer Collins & Aikman Corp., whose 10¾% senior notes due 2011 were seen at 31 bid, well down from 37 previously, and whose 12 7/8% subordinated notes due 2012 dipped to 5½ cents on the dollar from seven cents previously.

Collins & Aikman's equally bankrupt Troy neighbor, Delphi, saw its 6.55% notes slated to come due this Thursday at 84.5 bid, 85.5 offered, which a trader called down 1½ points on the session - but he also saw its 7 1/8% notes due 2029 at 79.5 bid, 80.5 offered, "unchanged - so go figure."

At another desk, the latter bonds were seen down two points at 80 bid, while the 6.55s were off a point at 85, Delphi's 6½% notes due 2009 were at 85.125, down almost a point, and its 6½% notes due 2013 were the big losers, dropping three full points on the session to 79.25.

The trader meantime saw most other automotive names also in retreat, with GM rival Ford Motor Co.'s 7.45% notes due 2031 at 72.5 bid, 73 offered, off half a point, while the company's Ford Motor Credit Co. financial unit's 7% notes due 2013 were unchanged at 87 bid, 87.5 offered.

Among the other parts suppliers, he said, former Ford unit Visteon Corp.'s 8¼% notes due 2010 dipped to 92.5 bid, 93.5 offered, while the Van Buren Township, Mich.-based components supplier's 7% notes due 2014 ended at 81.5 bid, 82.25 offered, each down a full point.

He saw bankrupt Toledo, Ohio-based parts maker Dana's 6½% notes due 2008 and its 5.85% notes due 2015 each down two points on the session, at 87 bid, 88 offered and 76 bid, 77 offered, respectively, although Dana's 7% notes due 2028 were unchanged at 78 bid, 79 offered.

Bankrupt Novi, Mich.-based automotive frame maker Tower Automotive Inc.'s 12% notes due 2013 were at 70 bid, 72 offered, a full three-point loss.

Back among the non-bankrupt auto supplier names, he said Rochester Hills, Mich.-based parts maker Dura's 8 5/8% notes due 2011 were down 1½ points at 84.25 bid, 85.25 offered, while the company's 9% notes due 2009 went to 55 bid, 57 offered, "down only half a point - why, I don't know. The selling was concentrated in the 8 5/8s."

GM higher

While the parts suppliers were struggling along, though, GM was still taking an upside ride. Its benchmark 8 3/8% notes due 2033 were seen by a trader to be "still firm" at 77 bid, 78 offered, even as the bonds of other automotive-linked names were lower. GM, he said, "didn't see much movement."

A market source at another desk actually saw those bonds a bit easier, at 77.125, down from 77.5 - but said most of the company's other bonds - relatively less traded than the 8 3/8s - seemed better. GM's 8.80% notes due 2021 advanced to 79 bid from 77.875 previously, its 8¼% notes due 2023 rose a point to 77.75 bid, while its 8.10% notes due 2024 were two points better at 74.25, and its 6¾% notes due 2028 gained 1½ points to 72.5.

Yet another market source saw GM's 7 1/8% notes due 2013 down half a point at 81, while the 8 3/8s were also off half a point at 76.75 bid, 77.25 offered. He saw the 8% notes due 2031 of GM's financial unit, General Motors Acceptance Corp., off ¼ point at 94.75 bid, 95.25 offered.

Those GM bonds had moved strongly higher of the previous several sessions, in apparent reaction to the news announced Friday that former unit Delphi had reached agreement with the United Auto Workers union and with GM on an expanded buyout package for which all 22,000 UAW-represented hourly employees, and was in talks on similar agreements with its other unions, representing about 11,000 more Delphi employees. Delphi hopes to get as many employees as possible to take the lump-sum payments and retire, as it tries to slash its labor costs and restructure in Chapter 11.

GM - which has agreed to foot much of the bill for its problem child's buyout - is anxious to keep the peace, however shaky, between Delphi and its union, in order to avoid a potentially disastrous strike by Delphi's union members, which could play havoc with GM's production schedules just at the time when the automaker is trying to regain its financial health with the help of new models that it hopes will attract consumers.

Noting that GM held its own while other bonds in the sector were lower, a trader observed that "just trying to stay in one place is frequently the most difficult thing of all." Sometimes, he continued "the status quo looks pretty damn good. You could see this meltdown in a lot of these markets here. We've been around long enough, and we've seen this movie before - but that doesn't make it any less scary every time you see it."

Calpine lower

Apart from the autos, a trader saw the bonds of bankrupt San Jose, Calif.-based power generating company Calpine Corp. down about a point on the session, with its 7¾% notes due 2009 dipping to 67 bid, 68 offered, while the 8½% notes due 2008 of the company's Calpine Canada Energy Finance II ULC unit also lost a point, to 63 bid, 65 offered.

Sea Containers drops

A trader saw Sea Containers Ltd.'s 10¾% notes slated to come due on Oct. 15 down two points on the session at 95 bid, 97 offered, a day after the Bermuda-based maritime operator announced that it had sold its Baltic ferry business - though for less money than many in the market had been expecting - and had also discussed potential covenant and bond indenture problems as its liquidity remained under pressure.

Another trader said that while Sea Container's bonds had gyrated around on Monday but ended not much changed, as investors tried to figure out the total meaning of its lengthy press release, "they definitely went down" on Tuesday, with the 103/4s at 95-96, the 10½% notes due 2012 at 94.5 bid, 95.5 offered, and its 7 5/8% notes due 2008 at around 93, each down several points on the day.

"There was a lot of doubt and uncertainty" on Monday, "but they digested it [Tuesday] and took the bonds down," he said.

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