Owens Corning was volatile last week as paper was said to have traded at 55 before shooting up to the 561/2 58 context. Traders said a rumor that bank debt lenders would receive a recovery of 60-70 cents on the dollar through a settlement plan circulated through the market. Owens Corning is pursing a settlement after the bankruptcy judge indicated she would prefer the company reach an agreement with its creditors rather than make a ruling on the issue of substantive consolidation, said a source close to the case. Substantive consolidation threatens lenders' subsidiary guarantees. A company spokesman could not comment on settlement negotiations.
Credit Suisse First Boston, as agent to the lenders, filed an objection to the company's current plan of reorganization. "The plan seeks to impose unrealistic and legally unsupported solutions to the two major issues in this case the 'intercreditor' dispute centering on substantive consolidation and the valuation of Owens Corning outstanding tort liability," noted the objection. Under the recently proposed "Fairness in Asbestos Injury Resolution Act of 2003" as currently filed, Owens Corning's multi-year funding obligations to a national trust would be less than $1 billion, stated the objection. This compares to the original estimation of asbestos liabilities of approximately $16 billion. At a court hearing last Wednesday, however, the bankruptcy judge declared that the confirmation of a plan would not be postponed based on pending legislation, said an attorney present at the hearing.
Owens Corning has until June 30 to resolve as many objections as possible and complete a revised disclosure statement, said the company spokesman. The new disclosure statement will be distributed to the various creditor groups, which have until July 15 to provide the company with informal comments. Owens Corning must file another revised disclosure statement by Aug. 8 with objections due by August 22. The final disclosure hearing is currently scheduled for Aug. 27, the spokesman noted.