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Owens Corning Bank Debt Surges On Reorg Plan

06 Jan 2006

Owens Corning's revolving credit soared seven points to the 146-147 range after the company filed an amended plan of reorganization.

Owens Corning's revolving credit soared seven points to the 146-147 range after the company filed an amended plan of reorganization. The new plan, which was filed in the U.S. Bankruptcy Court in Wilmington, Delaware on Dec. 31, incorporates a court ruling on substantive consolidation and sets recoveries for bank lenders and bondholders.

Under the new plan, bank debt holders will receive an estimated $2 billion. Recovery rates are based on 100% of what the bank creditors were owed when the company filed for bankruptcy, plus interest and fees. If the creditors vote against the plan, they will receive 100% of what they were owed at the time of the filing, plus an interest rate the bankruptcy court will decide upon. Bondholders will receive 48.9% of what they were owed at the time of the company's bankruptcy filing. They will receive 38% of what they are owed if they vote against it.

The bankruptcy takes into account a landmark court ruling on substantive consolidation. In August, the U.S. Court of Appeals for the Third Circuit overturned a district court decision that would have removed the structural seniority position of bank lenders owning debt in Owens Corning. It also establishes Owens Corning's asbestos liabilities at $7 billion.

A spokesman for Owens Corning said the plan has support from the steering committee of bank holders as well as the asbestos creditors committee. Creditors still have to vote on the plan, which is also awaiting court approval.

06 Jan 2006