Still more upside for Delta, asbestos names still on firming trend

By Paul Deckelman

New York, Nov. 8 - Delta Air Lines Inc.'s formerly battered bonds continued to reach for the skies Monday, as the troubled Atlanta-based carrier reported further progress in efforts to line up financing to meet its cash needs - even as the carrier's pilots continued to vote on a $1 billion pay cut package.

Back on the ground, asbestos-linked names - on fire since last week's elections raised the possibility that a reformulated Congress will be more likely to approve a mechanism for paying asbestos injury claims while capping the companies' massive potential liabilities - continued to improve in Monday's dealings.

A market source quoted Delta's benchmark 7.70% notes due 2005 up another 2½ points on the session to about 85 bid, while its 7.90% notes due 2009 were seen half a point better at 50.5. He quoted Delta's 8.30% notes due 2029 a point better at 39.5 bid.

A trader at another shop saw the bonds improved on the day, but at slightly lower levels. He pegged the 7.70s up two points on the session to 83 bid, 85 offered, the 7.90s 50 bid, 52 offered, up a point, and the 8.30s a point ahead at 39 bid, 41 offered.

It is significant to remember that only a few weeks ago, the 8.30s were languishing in the lower 20s, with the 7.90s perhaps five or six points ahead of that level - while the 7.70s were still treading water in the low-to-mid 40s.

What has turned things around for Delta has been a number of factors, the chief among them being the pilots' union finally caving in to company pressure and presenting its more than 7,000 Delta members with the $1 billion pay cut package. The captains started voting last Monday and will wrap up the balloting by Thursday.

The company has also reported some progress in its efforts to cut its debt, having reached the minimum tender condition number on its effort to exchange new debt for a larger face amount of its existing debt.

And there's been progress in lining up new financing, including last week's announcement of $500 million of new funding from a unit of General Electric Co.

On Monday, the company touted further progress along this front. It announced that it had lined up $50 million of an estimated $135 million in additional liquidity that the company will need to meet financing commitments in early 2006, and said it is currently pursuing other financing transactions to meet that goal.

On top of that, Delta said that it had gotten commitments from more than 100 vendors and suppliers to save the company about $29 million per year.

Delta - which recently introduced a wide-ranging turnaround plan that includes the airline making sure that its suppliers of everything from plastic utensils to aircraft engines give it the best deal possible - said that it is still in talks with other vendors and suppliers to obtain similar additional savings.

Asbestos debt up again

Elsewhere, the asbestos names were seen continuing to gain Monday, extending a protracted rise that started a week earlier, when the bonds of bankrupt Chicago-based building products maker USG Corp. suddenly began to push upward.

Then after the election results became known - with the Republicans hanging onto the White House and extending their control of the Senate and the House, in the process ousting Senate Democratic leader Tom Daschle - the bonds of not only USG but such other bankrupt asbestos-challenged names as Toledo, Ohio-based insulation maker Owens Corning, Lancaster, Pa.-based floorcovering maker Armstrong World Industries Inc., and Southfield, Mich.-based automobile parts manufacturer Federal-Mogul Corp. began to move up, and they continued to do so on Monday.

A market source, while seeing the USG 8½% notes due 2005 and the defaulted 9¼% notes that were to have come due in 2001 essentially unchanged at 122 bid and 120 bid, respectively, quoted the Owens Corning paper, such as its 7% notes due 2009, 7½% notes due 2018 and 9 3/8% notes due 2012, up 2¼ points on the session to 67.25 bid.

He saw Armstrong bonds, like its 6.35% notes that were to have matured in 2003, its 6½% notes due 2005 and 7.45% notes due 2029 up ¾ point to 70 bid, while Federal-Mogul issues, such as its 7½% notes due 2009, 7 7/8% notes due 2010 and 8¼% notes due 2005, also up ¾ point to 30 bid.

Another trader saw Armstrong's bonds and Owens Corning's each up a point at 73 bid, 75 offered and 68 bid, respectively.

While he said Federal-Mogul was "about the same" at 30 bid, 32 offered, he saw USG "up a couple at 127 bid.

Dan River steady

Apart from the asbestos situation, Dan River Corp.'s 12¾% notes due 2009 were being quoted unchanged at bid levels in an 18-20 context, even as the bankrupt Danville, Va.-based textile maker's dispute with Deutsche Bank over debtor-in-possession and exit financing escalated (see related story elsewhere in this issue.)

And Portola Packaging's 8¼% notes due 2012 gyrated around at lower levels, falling as low as 72 bid from prior levels in the 77-78 area, after Moody's Investors Service downgraded the San Jose, Calif.-based plastic packaging materials maker's bonds and other debt ratings, but recovered from those lows to actually end unchanged to up slightly.

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