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Owens Softens With Confirmation Litigation

12 Apr 2003

Owens Corning was softer again last week as the company began litigation last Tuesday to move toward confirming its plan of reorganization. The bank debt was a few points weaker at 64-67, according to traders. No trades could be confirmed. "Owens Corning has been on again and off again and now it's off again," said one buysider, noting that the market for the company's bank debt has been volatile throughout the bankruptcy process.

The plan being pursued provides for two alternative creditor recovery schemes. The first, which would apply if the plan is approved by the major creditor constituencies, would assume that the total liability from current and future asbestos claims will be $16 billion and that a preferred recovery of $400 million will be given to holders of bank debt claims. They will also get pro rata recovery on the balance of their claims. Bank debt holders must accept the plan to receive the extra $400 million, which comprises cash in the amount of $20 million, $180 million in senior notes, and $200 million in new common stock. "The $400 million initial offer to the banks was an effort to settle a claim that they have against some secured loans that are co-signed by entities that are not in bankruptcy," explained a company spokesman.

If the plan is not approved by the creditors, aggregate asbestos liabilities would be determined by the court. According to company filings, disagreements raised by creditors concerning the Owens Corning plan of reorganization will be addressed by the litigation as a part of the confirmation process. Creditors have not yet had a chance to vote on the plan of reorganization, noted the spokesman.

12 Apr 2003