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Owens Corning Propelled By Asbestos Legislation Negotiations

28 Jun 2003

Owens Corning ran up about 15 points and more than $100 million of the loan changed hands last week as progress was made on a bill that is set to form a national trust fund to deal with asbestos liabilities, according to a dealer. The name started the week ticking out of the 60s into the 71-72 context. By week's end, however, traders noted that the bank debt shot up again following more negotiations of the bill and traded as high as 77-78. One dealer suggested that if the legislation gets passed, levels for the paper could rise even higher. Another believes that the market price for the loan already takes into account much of the benefits that will be passed along to lenders.

The most recent activity in the price of Owens Corning loans has been triggered by negotiations of the bill during the mark up sessions held by the Senate Judiciary Committee. The bill, known as the Fairness in Asbestos Injury Resolution Act of 2003, has been designed to create a fair and efficient system to resolve claims of victims for bodily injury caused by asbestos exposure. The bill was introduced on May 22 by Sen. Orrin Hatch. During a mark up session, the committee debates and considers amendments to a measure and determines whether the measure will be recommended to the full Senate. The market views the sessions as indications that the bill is on its way to completion. The bill originally provided for a $108 billion national liability trust, but reports indicate that recent amendments call for insurers and companies with asbestos liabilities to be held accountable for an additional $45 billion if the trust fund runs dry. Calls to a Senate Judiciary Committee spokeswoman were not returned by press time.

Initially, Owens Corning estimated that it would need to account for $16 billion in asbestos liabilities. Although a national trust is likely to drastically reduce the amount that Owens Corning will have to dole out, the bankruptcy court decided that the confirmation of a reorganization plan will not be postponed based on pending legislation. An Owens Corning spokesman said the company is still working toward a consensual plan of reorganization with its creditors and noted that all parties are watching the process intently in Washington. The company has until today to complete a revised disclosure statement.

28 Jun 2003