Owens Corning's bank debt slipped into the 60-62 range from the 65 level last week after the company filed its third amended joint plan of reorganization. The new plan does not provide a proposed settlement value to bank debt lenders for their claims to certain subsidiary guarantees. The basis of the Owens Corning plan calls for substantive consolidation. If the company succeeds in its consolidation efforts, all the assets of the company will be thrown into the same pot to be distributed among the creditors. Lenders' claims to the guarantees would have provided the group with a higher recovery.
The company's second amended joint plan of reorganization provided for a guarantee settlement payment of $400 million. "The [settlement value] was an offer from the asbestos committee to coax everyone to a consensual agreement," explained one source familiar with the bankruptcy case. Under the latest plan of reorganization, lenders will receive a portion of cash, senior notes and new common stock. Lender recovery would only be about 60-70 cents on the dollar under this scenario, according to a dealer. An Owens Corning spokesman declined to comment on lenders' guarantees. "We are still hoping to reach a consensual plan that's in the best interest of our creditors," he said. Calls to counsel representing bank debt lenders were not returned by press time.
There is a hearing scheduled for August 27, but unsecured creditors have filed a motion to delay the hearing for 60 days in an effort to see if pending asbestos legislation will pass. The legislation is expected to drastically reduce the amount that Owens Corning will have to dole out to satisfy its asbestos litigation claims. The legislation is still in the U.S. Senate, which is in recess at this time, but the feeling is if the Senate passes the legislation, it will easily pass the U.S. House of Representatives and be signed by the president, noted the source.