Asbestos companies continue slide; American Airlines falls on negative reports

By Carlise Newman

Chicago, July 2 - As was the case Tuesday, volume continued to be low ahead of the long holiday weekend in distressed debt trading Wednesday, with most issues trading in a narrow range. Worldcom and asbestos companies Owens Corning and Armstrong Worldwide were most active, but there was movement in American Airlines parent AMR Corp., which has been bombarded with a slew of negative news in the last few days.

On Tuesday, reports surfaced that American Airlines began laying off more than 3,100 flight attendants, after a federal judge turned aside a union official's bid to block the job losses.

More than half the workers who lost their jobs Tuesday had worked for Trans World Airlines before American parent AMR Corp. bought TWA out of bankruptcy in 2001.

American's 9% notes due 2011 were quoted at 60 bid, 63 offered, 2 points lower than Tuesday.

"It's not looking good for them," a trader said.

AMR said it is readying employees, investors and customers for the latest round of cost-cutting that could change the way the carrier operates. The Fort Worth-based company signaled that cut-backs to its service will be coming soon, saying it cannot continue to fly all the same nonstop routes nor provide the same level of service in unprofitable markets.

The changes could affect flights and routes and the use of space in major airports, as well as reservation centers and even maintenance bases. The structure of hubs in Dallas/Fort Worth, Chicago and St. Louis is also under review.

In a statement, Fort Worth, Texas-based American said decisions will be coming soon but stopped short of outlining specifics including whether additional job cuts will follow.

Owens-Corning notes fell 3 points, for a total of 7 points in two days, to 47 bid, a trader said.

"There's been a lot of activity in asbestos names this week. They just keep going lower and lower," a distressed debt trader said.

He said Armstrong World Industries Inc.'s bonds fell 4 points Tuesday and another 2 points Wednesday to land at 46 bid, 48 offered.

Elsewhere, HealthSouth Corp.'s bonds firmed for a second day in a row, with one source saying the 6 7/8% notes due 2005 rose 1 point to 84 bid, while the 8 ½% notes due 2008 rose "one or two" points to 83 bid. The Birmingham, Ala.-based physical therapy provider has been plagued with scandal and alleged fraud in the past few months.

Conseco Inc.'s 9% notes due 2008 extended bond was quoted at 57 ½ bid, 58 offered, unchanged from Tuesday, when they had firmed a bit after Moody's Investor Service's affirmed the insurance company's senior debt at Ca with a developing outlook.

WorldCom Inc.'s 7 ½% notes due 2011 were quoted down 1 point to 28 bid, 29 offered, a trader said. The Ashburn, Va.-based long-distance telephone company "is always active," a trader said.

"It's just one of those names that crosses everyone's desks every day, along with Adelphia lately," he added.

Adelphia Communications Corp.'s 9 7/8% notes due 2007 were seen falling 0.5 point, ending the session at 60 bid, 62 offered. The Greenwood Village, Colo.-based telecommunications firm has been plagued in the last few months with fraud allegations.

"It was just another one of those days, ahead of an early close, nothing going on but bits and pieces here and there," a trader said of Wednesday's action. The Bond Market Association recommends an early close for the markets on Thursday, and they will be closed for Independence Day on Friday.

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