Owens-Corning paper up as judge gets the boot; Salton bonds gyrate

By Paul Deckelman and Sara Rosenberg

New York, May 17 - Owens Corning Inc.'s bank debt jumped about seven or eight points on Monday and traded actively, given a boost by the news that a bankruptcy court judge overseeing its reorganization and those of other asbestos-challenged companies had been removed from the case - something the companies had been asking for, claiming the jurist had been biased against them.

Elsewhere, Salton Inc. bonds were jumping around, with one trader even likening the notes to a yo-yo, before ending higher, as the bonds continued a comeback that had started on Friday, after they had taken a frightful pounding earlier in the week on poor numbers and news of a covenant violation.

Owens Corning's bank debt was being quoted at 75.5 bid, 76.5 offered, a trader said.

On Monday, The Third U.S. Circuit Court of Appeals removed Judge Alfred Wolin from overseeing the asbestos-related Chapter 11 cases of Toledo, Ohio- based insulation maker Owens Corning, W.R. Grace & Co. and USG Corp. due to a question of impartiality.

Wolin was originally assigned to judge five asbestos-related Chapter 11 cases - those three, plus Armstrong World Industries Inc. and Federal-Mogul, Inc. He will continue to oversee the Federal-Mogul case, and a separate hearing will be held to determine whether he will continue judging the Armstrong case.

Kensington International Ltd. and Springfield Associates, LLC as agents for Owens Corning's pre-petition bank lenders petitioned Wolin to recuse himself arguing his advisors had conflicts of interest. D.K. Acquisition Partners LP, Fernwood Associates LP and Deutsche Bank Trust Co. Americas petitioned him to recuse himself in the Grace case and USG petitioned him in its own case. He refused [see related story on page one of this issue].

Earlier, a trader in distressed bonds said that he had observed "a lot of noise - but no [price] movement" in Monday's dealings of some asbestos-related company names.

He saw Owens Corning, for instance, trade as low as 38 bid, before firming off that low to bounce back and end at 39.5 bid, 41.5 offered.

The trader saw Armstrong's bonds remaining in the 52-53 context where they have recently traded, while Federal-Mogul's bonds were seen off a point at 25.5 bid, 27.5 offered.

Salton moves around, ends better

Elsewhere, the distressed-bond trader saw Salton Inc.'s bonds - which had fallen sharply early last week after the Lake Forest, Ill.-based small-appliance maker reported a sharply wider loss and said it was in talks with lenders aimed at solving covenant violations - going "up an down like a yo-yo," before finally closing at somewhat higher levels.

He saw the company's 10¾% notes due 2005 firming to 63 bid from prior levels around 59, while its 12¼% notes due 2008 managed to end at 57 bid, up from 54 previously.

At another desk, the 121/4s were seen trading at 56.5 bid, up 1¾ points on the session.

There was no fresh news out about the company, which makes the popular George Foreman brand home hamburger and hotdog grills.

Trico drops

Trico Marine Services Inc.'s 8 7/8% notes due 2012 were seen down more than a point, at 45 bid. On Monday, Standard & Poor's lowered its corporate credit and senior unsecured debt ratings on the company D - after having lowered them last week to CC - and removed the ratings from CreditWatch with negative implications.

S&P said the action affects about $400 million of the Houma, La.-based offshore drilling services provider's debt.

The ratings agency cited Trico's failure to make the May 15 coupon payment on its $250 million of 8 7/8s.

However, the agency left the door open to bringing the rating back up should Trico fulfill its promise to make the interest payment during the standard 30-day grace period.

Parmalat a little lower

Parmalat Finanziaria SpA on Monday proposed placing debt and assets in a new company that could be partly owned by creditors.

Under the rough framework of the plan, the new entity would be part of a proposed deal with creditors to be issued by state-appointed insolvency commissioner Enrico Bondi in the coming weeks. The Italian government put Bondi, a turnaround expert, in charge of restructuring the insolvent dairy products company shortly after its collapse late last year amid allegations that billions of euros might have been pilfered from its coffers. The state investigation into the alleged accounting fraud continues.

Meantime, Parmalat said it had decided not to sell the off the main activities of U.S. dairy operation, Farmland Dairies LLC, and that it was looking for a new CEO for the company.

The Italian parent company said institutions providing bankruptcy funding while the company's U.S. dairy operations restructure support a plan to continue operations

Parmalat's bonds were quoted at 13 bid, 14 offered, down slightly from recent levels around 15.

Kasier steady

Kaiser Aluminum's bonds were quoted unchanged, even as the Houston-based aluminum producer, currently restructuring, reported a wider first quarter loss of $64 million, or 80 cents a share, versus a year-ago net loss of $65.1 million (81 cents per share). Net sales in the first quarter of 2004 were $367.6 million, compared to $339.4 million in the year-ago period.

Kaiser's 10 7/8% notes due 2006 were unchanged at 98 bid.

Back among bank debt investors, "Various flavors" of Adelphia Communications Corp.'s paper traded around a bit on Monday at mostly unchanged levels, according to a trader.

The Old Century paper was quoted at 96.5 bid, 97.5 offered and the New Century was quoted about a quarter of a point lower than the Old Century, the trader said.

The bankrupt Greenwood Village, Colo. cable company's bonds were meanwhile half a point lower, its 10 7/8% notes due 2010 finishing at 104 bid.

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