DE Shaw, J.P.Morgan Chase Pretty in Pink?

Seriously folks. Flirty Purty Pink could be the new fall color for J.P. Morgan Chase and a couple of dozen of its hedge-fund friends. On May 10, Owens Corning, the maker of pink fuzzy insulation that is operating under bankruptcy-court protection, announced a new restructuring plan that included a $2.2 billion rights offering for its bondholders. Since then, some bondholders have become bearish on the deal, and that could leave J.P. Morgan Chase and a few hedge-fund investors with a bunch of the Pink Panther on their balance sheets.

J.P. Morgan agreed to guarantee Owens Corning's offering and shared the commitment with a syndicate of investors led by hedge fund D.E. Shaw. Owens Corning will pay J.P. Morgan $100 million for the favor. The firm is taking orders until next month.

That is a big fee for a backstop -- the commitment to buy any shares that aren't sold. Even Warren Buffett's Berkshire Hathaway had to cut its backstop fee to $67 million from $100 million when it guaranteed a $1.8 billion rights offering in July for USG, the wallboard maker. Confident that USG shares would be profitable, a few hedge funds had unsuccessfully tried to wrest the backstop deal away from Berkshire, offering the cut-rate price of $65 million.

These days, however, few believe the Owens Corning rights offering will be as successful as USG's. An Owens Corning spokesman declined to comment. Probably too busy squeezing into those hot pants and strapping those haut pink heels on.

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