W.R. Grace & Co.'s $500 million pro rata has been trading up to the 116-117 range as the market takes a more bullish stance on the company's equity valuation. W.R. Grace is performing well, with investors also betting on a more favorable asbestos settlement, explained a trader. The debt of the bankrupt company is expected to be repaid with accrued interest. W.R. Grace, which filed for bankruptcy in 2001, traded around 106 at the beginning of last month and has climbed from the 80s range since May (LMW, 5/21).
There is speculation that the name could rise higher and this has attracted new buyers. "A better than expected asbestos settlement will bring a higher valuation to the banks and the equity," the dealer noted. Sellers at these levels could be investors that are comfortable taking profits and not risking a downside, a second dealer said. "Pigs get fat but hogs get slaughtered," he noted.
Meanwhile, Federal Mogul Corp.'s $360 million "A" and $343 million "B" loans traded around 94 1/2-95 up from 93-94 last month (11/1). The first trader said levels were stronger due to the underlying performance of the company. However, the Dec. 9 date for approval of the reorganization plan is also coming closer and could also be an upwards driving factor. The market has adopted a more bullish view toward the outcome of the asbestos settlement since the Republican electoral victory heightened chances for tort reform. Spokespeople for the two companies did not return calls.