Owens Corning, W.R. Grace bonds, loans firm along with stock; Delta seen up

By Paul Deckelman and Sara Rosenberg

New York, Nov. 30 - Owens Corning and W.R. Grace & Co. both saw improvements in their already strong bank debt levels for what seemed like no other reason other than the companies' stocks are up, while bankrupt Toledo, Ohio-based insulation maker Owens Corning's bonds were also seen having risen strongly on the session.

Another name that seemed to be heading skyward, several traders said, was Delta Air Lines Inc.

Owens Corning's bank debt traded at 89, "and probably ended the day at 88.5 [bid], 89.5 [offered]", up two to three points on the day, a trader said.

Meanwhile, Columbia, Md.-based building materials maker Grace's bank debt was quoted at 116.5 bid, 117.5 offered, up about half a point on the day, the trader added.

A trader in distressed bonds meantime said that Owens Cornings' notes had jumped to 78 bid, 80 offered, from prior levels as low as 72 bid, 74 offered. At another desk, the Owens Corning bonds were seen having improved to 76.5 bid from earlier levels at 72.5.

The company's over-the-counter bulletin board-traded shares, meantime, were on fire - even though Owens Corning has already said that shareholders stand to get exactly nothing when the company finishes reorganizing. Apparently relishing living dangerously, equity players on Tuesday bid the shares up 94 cents, or a whopping 24.10%, to $4.84. A month ago, those shares traded in the 50-cent range. Volume Tuesday was 10.9 million shares, more than eight times the usual activity level.

Pressed for an explanation of the sizable gain in the bonds, the first trader suggested that "people must have liked their operating results" as a possible rationale.

Earlier in the month, Owens Corning had reported third-quarter income from operations of $153 million, including a Chapter 11-related credit of $5 million and a credit for asbestos-related insurance recoveries of $3 million, versus $104 million a year earlier, which included $5 million of Chapter 11-related charges and a $1 million other charge as the result of a contractual post-closing adjustment to the selling price of the company's metal systems business. Net income meantime grew to $94 million from $55 million a year earlier.

Halliburton resolves asbestos issues

Perhaps of more immediate impact to bondholders and shareholders of companies like Owens Corning and Grace, which were driven into Chapter 11 under a barrage of asbestos-related lawsuits, was the announcement after the close on Monday by Halliburton Co. that a bankruptcy judge had approved the final insurance settlement agreements between Halliburton subsidiaries DII Industries and Kellogg Brown & Root, among others, and the companies' insurance carriers.

The Houston-based oil field services company said that the settlements resolve the debtors' insurance disputes and will result in the receipt of more than $1.5 billion in cash, clearing the way for the successful conclusion of the units' bankruptcy proceedings.

Halliburton said that the bankruptcy court's approval orders are now final and the settling insurers are obligated immediately to dismiss their pending legal motions in the case. The company anticipates concluding the bankruptcy by year- end, and funding of trusts that will pay insurance claims against the companies, by the end of January.

The news that Halliburton finally sees some light at the end of the tunnel in the long bankruptcy process involving its subsidiaries must surely be considered good news for such companies as Owens Corning and W.R. Grace, as well as such other bankrupt asbestos-challenged companies as Lancaster, Pa.-based floorcovering maker Armstrong World Industries Inc., Southfield, Mich.-based auto parts maker Federal-Mogul Corp. and Chicago-based building materials manufacturer USG Corp.

Bonds and shares of those companies had recently been pushed up by investor response to the November elections, which resulted in solidified Republican control of both houses of Congress, raising the possibility that a Capitol Hill logjam over a proposed $140 billion asbestos claims payment mechanism might be broken during the new session and those companies as well would be able to put their asbestos troubled behind them, as Halliburton's subsidiaries, have apparently done.

In Tuesday's dealings, the first bond trader saw Armstrong's bonds up a point, at 68 bid, 70 offered. Federal-Mogul's bonds were seen little changed, at 30.75, while USG's notes, a trader said, continued to hover around the 130 bid mark.

In equity trading Tuesday, Armstrong's OTC bulletin board-traded shares jumped 23.81% to $2.60, on volume of 3.2 million, 10 times the norm, perhaps also helped by the news that the company will eliminate about 240 jobs as a belt-tightening move, "in response to changing market conditions."

Shares of the other asbestos-linked companies were up by more modest amounts Tuesday.

Delta rises

Away from the asbestos names, a trader said that one of the main market features he saw was "Delta was up again, at least in the short end."

He saw the Atlanta-based air carrier's flagship 7.70% notes due 2005 firm to 87 bid, 89 offered, up from 85 bid, 87 offered, although he said the company's "long bonds [referring to the 8.30% notes due 2029] didn't change, hanging in around the lower 40s.

Another trader said he saw "all the airlines firmer," with the Delta 7.70s "up a couple" to levels as high as 88 bid, 90 offered. However, he too saw the 2029s still mired in the 41ish neighborhood.

Yet another trader took a contrarian view, seeing the 7.70s still at 85-86 and the 8.30% notes "actually lower, at 41.5 bid, 42.5 offered.

He said that he "did not see a lot of Delta trading around," even with oil prices lower, which he said "could only help."

Crude prices fell Tuesday, powered downward by expectations that an upcoming government report would show rising inventories of heating oil.

Light, sweet crude for January delivery fell 63 cents on the New York Mercantile Exchange to settle at $49.13 a barrel, shifting gears after hitting an intraday high of $50.40.

Among other distressed issues, a trader saw Mississippi Chemical Co.'s 7¼% notes due 2017 firming to 60 bid, 62 offered from 58 bid, 60 offered previously, while Trico Marine's 8 7/8% notes due 2012 were heard to have improved to 55 bid, 57 offered, from prior levels at 52 bid, 57 offered.

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