Owens Corning's bank debt went on another wild ride last week as it jumped to the 75 level before settling in the low 70s range. This time around, the movement in the price of the debt was not caused by the asbestos legislation wading through Washington, but rather by a motion brought by two Owens Corning lenders for the removal of Judge Alfred Wolin (www.loanmarketweek.com, 11/5). The lenders, Kensington International Limited and Springfield Associates, have now filed an appeal with the Third Circuit Court, claiming that two court-appointed consultants have a conflict of interest.
"The Creditors have learned that Messrs. David R. Gross and C. Judson Hamlin (the 'Conflicted Advisors'), two of the Court-appointed 'Consultants' who have participated materially in the Court's administration of these cases, are not disinterested," the motion claims. While Owens Corning bank debt has come down off its high, the bank debt is still stronger than the 66-68 range, where it stood at the end of last month. Creditors are hopeful of a better recovery if Wolin recuses himself. "Wolin has been extremely asbestos friendly and also very bank unfriendly," a dealer commented. The asbestos liability claims will likely be assigned a fraction of what they are currently looking at and creditors will be able to get more out of Owens Corning's reorganization, explained one person close to the case. In an early proposed plan of reorganization, a $16 billion figure was assigned to asbestos liabilities claims.
Owens Corning recently filed its fourth amended joint plan of reorganization late last month. The reorganization plan is less of what the bank debt holders and bondholders want, said one source familiar with the case. The source also added that if bank debt holders and bondholders cannot come to a consensual agreement, asbestos claimants have the ability to cram down other creditor claims. A spokesman for Owens Corning declined to comment.
Judge Wolin was given an oversight role on large asbestos credits, including USG Corp., Federal-Mogul Corp., Owens Corning, Armstrong Holdings and W.R. Grace & Co. in early 2002. At that time, market players suggested the consolidation would create a more efficient litigation environment (LMW, 1/02). One person close to the case speculated that the recusal motion could have far-reaching effects on the other asbestos cases as well. The "conflicted advisors" also participated in those cases.