Armstrong World Industries' bank debt dropped seven points to 82 last week after it surged as high as 90 from 75 following Owens Corning's announcement of its new plan of reorganization two weeks ago. Traders said Armstrong, which is in bankruptcy, could emerge soon with a plan of reorganization similar to that of Owens Corning. Armstrong's bank debt fell because of the weakness in the equity markets last week, they said.
A trader said Armstrong has some of the same creditors as Owens Corning, which has sparked rumors it could be subject to a similar reorganization plan. But, unlike Owens Corning's bank creditors, holders of Armstrong's bank debt could be offered equity in the reorganized company, said a trader. In the case of Owens Corning, only the bondholders are being offered shares in the company when it emerges from bankruptcy.
The bank debt holders will receive full recovery, but no equity ownership. Owens Corning's bonds jumped 20 points to around 120 on news of the reorganization plan. The bonds have since lost several points. Owens Corning's 7.5% '05 bonds fell to 113 last week after trading as high as 122 1/2 the week prior. A trader said Armstrong's bank debt could trade as high as 150 if the bank creditors are offered equity ownership. Armstrong's bonds surged 10 points two weeks ago to 90 before falling seven points to 83 last week.
Armstrong filed for bankruptcy in December 2000 to resolve its liability for asbestos personal injury claims. An Armstrong spokeswoman did not return calls seeking comment.