Federal-Mogul debt up as statement okayed; Pegasus seen firmer

By Paul Deckelman and Sara Rosenberg

New York, June 7 - Federal-Mogul Corp.'s bank debt was up about half a point on Monday as the Southfield, Mich.-based auto parts manufacturer moved a step closer to coming out of bankruptcy - where it has been since Oct. 1, 2001.

A bank debt trader said that the company's loan had firmed up to 92 bid, 92.75 offered.

On Friday the company's disclosure statement won court approval, according to an order filed later that day with the U.S. Bankruptcy Court for the District of Delaware, which is overseeing its case.

However, a trader in distressed bonds saw not much movement in the company's notes, which continue to hover at a bid range around 26 bid, 27 offered.

The Federal-Mogul bonds had moved up to that point last week, helped by a generally more positive feeling of investor sentiment about the prospects for asbestos-challenged companies, with the resignation from the bench of the judge who had been handling Federal-Mogul's case and those of several other asbestos defendants; the jurist, Alfred Wolin, had aroused the ire of some creditors who claimed that he could not be truly impartial because he was getting advice from lawyers representing plaintiffs in several other, unrelated asbestos lawsuits.

The bank debt of another asbestos company, Owens Corning Inc. meanwhile appeared to be unchanged at 77.5 bid, 78.5 offered, as the paper was uninspired by the latest announcement that an agreement in principle has been reached with asbestos creditors and the official representatives of pre-petition bondholders and trade creditors, according to a trader.

"It's not really new news," another trader explained.

The Toledo, Ohio-based insulation maker, in bankruptcy since Oct. 5, 2000, now has support for its plan of reorganization from all of its major creditor groups except for holders of pre-petition bank debt, according to a company news release.

The agreement provides that all holders of bonds, bank debt and senior trade debt will receive a recovery equal to 38.5% of their claims upon the company's successful emergence from Chapter 11. The recoveries of all creditors are based on certain agreed and assumed values and will be comprised of cash, debt and equity.

"Although there continue to be significant challenges in our Chapter 11 case, the negotiation of this agreement was a very important step toward the company's emergence from Chapter 11," said Owens Corning general counsel Steve Krull, in the release. "With this settlement as a foundation, we are anxious to proceed with a confirmation hearing before judges Fitzgerald and Fullam as we work toward emerging from bankruptcy for the benefit of all of our stakeholders."

Traders saw the company's bonds meantime at 43 bid, 44 offered, the level to which they had moved last week.

A trader saw Armstrong World Inc.'s defaulted 9% bonds that were supposed to have matured unchanged at 57 bid, higher than they were about a week ago, but unchanged from the levels the Lancaster, Pa.-based floorcovering maker had moved to Friday.

Its 7.45% notes due 2029 were two points better at 55.5. Chicago-based building products maker USG Corp.'s 9¼% notes were unchanged at 101; its 8½% notes were likewise unchanged at 104.

Pegasus gains

Elsewhere, a trader saw Pegasus Satellite Communications Inc.'s bonds " up a couple of points," to bid levels around 56-56.5 for the Bala Cynwyd, Pa.-based satellite TV programming distributor's senior notes and 18-21 for its 13½% notes due 2007.

A market source pegged the 131/2s up half a point at 18.5, while its other notes were a point better at 56.

There was no fresh news out on the company, which filed for Chapter 11 protection last week in order to prevent DirecTV, whose service Pegasus sells in rural markets, and the National Rural Telecommunications Cooperative, an organization of which the company is a member, from ending its exclusive rights to sell DirecTV in its service territories.

Leap higher

Also on the communications front, Leap Wireless International Inc.'s bank debt rallied to 113 bid, 115 offered on Monday, up from Friday's level of 110, according to a trader.

"Maybe it's up with the equity market being stronger, although that seems like a pretty big jump," the trader added.

On Friday, the bank debt was higher by about half a point in reaction to the San Diego-based communications services provider's hiring of a chief executive officer.

William Freeman was appointed as CEO of the operating subsidiary, Cricket Communications Inc. Additionally, Freeman will assume a seat on Leap's board of directors when it emerges from Chapter 11 bankruptcy and will be appointed as CEO of Leap when court approval has been obtained. Freeman will be succeeding Harvey P. White.

Prior to Leap, Freeman was president of Verizon Public Communications Group, a business unit of Verizon Communications focused on payphones, prepaid programs, long distance and other services.

Airlines hold steady

A trader saw little or no movement in airline issues, despite news that a group claiming links to al Qaeda had threatened terrorist attacks against Western-flag airlines.

He quoted Delta Air Lines Inc.'s senior notes at 60 bid, 61 offered or 62 bid, "all just like Friday." United Air Lines parent UAL's bonds were unchanged at 8 bid, 9 offered, even as the carrier said it would now expect to emerge from Chapter 11 in the fall, rather than its earlier projection of the summer.

Mirant loans edge up

Mirant Corp.'s bank debt was a little higher, with quotes of 53.75 bid, 54.5 offered by the end of the day, up about half a point from prior levels, according to a trader.

The Atlanta energy company's paper had also moved up on Friday by about half a point, with some attributing the strengthening to company's filing of its 10-Q with the Securities and Exchange Commission.

"I didn't really see anything in the 10-Q that should have pushed the paper higher," the trader added.

Another energy name - Reliant Energy Inc. - was also up about half a point with quotes of 99.75 bid, 100.25 offered on the term loan on no specific news, according to a trader.

"People are buying into the story," another trader said in explanation of the strengthening in the Houston electricity and energy services company's bonds.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.