Owens Corning’s bank debt jumped at least 10 points to the 75-78 range following the recusal of Judge Alfred Wolin from three asbestos-related Chapter 11 cases. Owens Corning is trading up from the high 50s to the low 60s level where it was changing hands three weeks ago, said a dealer. Bank debt for USG Corp., one of the other two cases, is said to be trading slightly higher in the 93-96 range and bank debt for the third, W.R. Grace & Co. is unmoved in the 80s. The thought in the bank market is that a new judge will probably be more disposed to listen to the arguments of the bank debt holders versus those of the bondholders and other creditors, the trader added. The judge’s removal was requested by Owens’ largest lenders Kensington International and Springfield Associates, which claimed there was a conflict of interest regarding the two consultants appointed by Wolin (LMW, 3/29). The agent bank for a $1.6 billion lending syndicate also supported the recusal motion. It is highly unusual that the banks were so active in the judge’s recusal, the trader said.
According to a statement from Elliot Management Corp., the management company of Kensington and Springfield, Judge’s Wolin recusal will open the way for a fair and prompt resolution of the company’s three-and-a-half year long bankruptcy process. Bob Tarola, W.R. Grace’s cfo, said that the company did not know how the case would be administered from now on and if and how the judge’s decision would affect W.R. Grace’s bankruptcy administration.
In early 2002 Judge Wolin was given an oversight role on the large asbestos credits, including Owens Corning’s, USG, and W.R. Grace & Co., Federal Mogul Corp. and Armstrong Holdings (10/10). The Court did not rule on whether the judge should continue to preside over cases for Federal Mogul and Armstrong. Officials from Owens Corning and USG did not return calls.