About $250 million of bank debt from companies wrestling with asbestos litigation traded last week as dealers banked on credit restructuring and a shorter litigation process. The bank debt of Owens Illinois' and Owens Corning last week jumped 10 points and nearly 20 points, respectively. About $50 million of Owens Illinois traded in the high 80s, and as much as $200 million of Owens Corning traded in ranges from 40 to 56. Dealers cited Bear Stearns as one of the biggest players in the two names, but traders there declined to comment. Officials at the companies did not comment by press time.
Owens Illinois is working with banks to restructure its $4.5 billion facility, seeking to extend the maturity and juggle its capital structure. Banks are looking for the company to pledge assets to further secure any restructured deal. Dealers were optimistic that banks would restructure the deal, which is crucial to the company's recovery. "There's been a tug of war about how far out the banks are willing to extend it," he added. "The company needs to get the maturity extended or they'll run out of money." A completed restructuring could be a boon for the name. "If they get the deal done, it should trade in the low 90s," one trader said. Another trader concurred. "The distressed desks are all over this, just buying it for their customers," he said.
The Toledo, Ohio-based company is one of the largest glass manufacturers. Deutsche Bank, Bank of America and Bank of Nova Scotia lead the $7 billion deal for Owens Illinois, which is split into a $4.5 billion revolver and a $2.5 billion term loan. Calls to spokesmen at all banks were not returned.
Owens Corning had an even more dramatic week, but the reason was hard to pin down. The company's bank debt jumped about 50% over the course of a few days, trading at 40, 42, 45, 47, 50, 52, 55 and finally 56. "Clearly something's going on," a trader said, declining to elaborate. One player in the name said interest is jumping as the litigation process may clear sooner than expected. "There's just more buyers coming in, and the [litigation] process is shorter," he said.