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Asbestos-Related Credits Soar On Tort Reform Prospects

Prices on distressed credits with exposure to asbestos claims including Owens Corning, W.R. Grace and USG Corp. are skyrocketing and could rise farther on the increasing prospects for tort reform.

Prices on distressed credits with exposure to asbestos claims including Owens Corning, W.R. Grace and USG Corp. are skyrocketing and could rise farther on the increasing prospects for tort reform. Owens Corning's 7% of '09s have jumped to the high 70s, up around 30 points from a 45 bid a little over a month ago. Republican victories in the White House and Congress, as well as the defeat of Sen. Tom Daschle (D-S.D), are fueling expectations there will be legislation to limit asbestos-related lawsuits. "Daschle was made into the poster child for obstruction," said one distressed analyst, who believes there is now a 60% chance for tort reform.

To be sure, optimism on the tort reform front seems like a pipe dream to some investors. "This is just whistling in the dark," quipped one distressed investor, who thinks the rally will be short-lived and predicted the prospects for tort reform will be quashed by the first quarter of next year. Another investor echoed skepticism over the trading frenzy. "There are a lot of exogenous factors you can't count on. I'm not sure why today is the day to plow into something. It's crazy," he said, referring to Owens' rapid ascent.

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