GM leads auto names lower; Solectron bringing 10-year deal to market

By Paul Deckelman and Paul A. Harris

New York, Feb. 13 - Bonds of General Motors Corp. were lower Monday ahead of a scheduled announcement by the giant automaker on Tuesday afternoon concerning five of its Michigan plants, which are expected to be upgraded. Other automotive names were lower as well. Market participants did not see a direct link between that anticipated announcement and the lower bond prices, and suggested instead that the whole sector was feeling heavy amid investor unease about GM's former subsidiary, Delphi Corp., which has set a deadline of Friday for its unions to accept big wage and benefit concessions or see the bankrupt company ask the courts to impose them.

Trailing the historic weekend snow storm on the East Coast sources said that a very quiet high-yield market remained basically unchanged on the day.

In the primary market no issues were priced.

Milpitas, Calif., electronics manufacturing services provider Solectron Corp., issuing via Solectron Global Finance Corp., showed up with a quick-to-market $150 million offering of 10-year senior subordinated notes.

The company will host an investor call scheduled for 11 a.m. ET on Tuesday, and expects to price the deal on Tuesday afternoon.

Banc of America Securities has the books for the debt refinancing deal.

The only other deal thought to be in the market is Steinway Musical Instruments Inc.'s $175 million offering of eight-year senior notes (Ba3/BB-), which began a four-day roadshow on Monday, via UBS.

That deal is also expected to price before the end of the week.

Not a huge amount of cash?

Although the weekend snowstorm did not seem to thin the primary market ranks on Monday, sources described the session as extremely quiet.

And a consensus seems to be building that February, with 10 sessions remaining, could continue to be extraordinarily quiet with regard to the new issue market.

With little in the way of solid news, sources speculated that some names appear closer in the pipeline than others.

More than one source, for example, has mentioned Serena Software Inc.'s $225 million offering of senior subordinated notes being sold to help fund the acquisition of Serena by Silver Lake Partners for about $1.2 billion. Last week Standard & Poor's assigned its CCC+ rating to the notes. Meanwhile the company's $450 million senior secured credit facility via Lehman Brothers, Merrill Lynch and UBS, will launch on Tuesday, according to the Prospect News bank loan desk.

However a source close to the deal told Prospect News that the Serena bonds are likely March business.

Apart from such speculation, hard primary market news is in desperately short supply right now.

One high-yield syndicate official said that no one seems too surprised at the present state of quiet, given January's massive amount of issuance - approximately $16 billion.

The official added that the perception is that the buy-side still has cash to put to work in junk.

Perhaps not a huge amount, the source added, but he does think they still have some cash to put to work.

GM weak

Back among the secondary names, GM's benchmark 8 3/8% notes due 2033 were being quoted down anywhere from 1½ to two points. A trader saw them down 1½ points at 69.5 bid, 70.5 offered, while another trader, who pegged those bonds at that same level, considered that a two-point fall on the session.

GM's 7 1/8% notes due 2013 were meantime seen by a market source as having eased ¾ point to 73.5 bid.

In tandem with the decline in the GM bonds was a retreat in its financing unit's General Motors Acceptance Corp. bonds. The market source saw GMAC's 6 7/8% notes due 2012 down 1½ points to 90 bid.

GMAC's more widely traded 8% notes due 2031were seen by one trader as having fallen two points to 94.5 bid, 95.5 offered, while another saw the bonds down only a point at 94 bid, 94.75 offered.

Yet a third trader opined that "it seemed like they [GMAC] drifted lower. There was a lot of activity in them - there always is - but pretty lackluster movement." He saw the 8s down a point at 94, while the 6¾% notes due 2014 were about unchanged, in his opinion, right around 90 bid.

One of the traders said that from what he had seen of the news that GM is slated to announce on Tuesday, "I don't think it's going to be too momentous."

GM said that it will make an announcement Tuesday afternoon about five of the automaker's Michigan manufacturing sites, four of them located in the greater Detroit area. Company officials were to be joined at Tuesday's news conference by Michigan governor Jennifer Granholm, and several suburban Detroit county executives and other officials. The Wall Street Journal was reporting late Monday on its website that GM is expected to announce that it will spend $500 million to upgrade the five sites, which include two assembly plants, one metal stamping plant and two powertrain facilities.

News that the embattled carmaker will spend substantial money on plants in Michigan, which has been hit very hard by the downturn in the U.S. auto industry, represents something of a change in tone for GM, which in November had announced plans to close nine plants and three parts facilities in North America by 2008, with a loss of 30,000 hourly jobs.

"I don't see that as that big a deal," the trader said, speculating that if the Wall Street Journal report is right, people who were looking for some kind of blockbuster announcement from GM regarding either its ongoing efforts to sell a 51% stake in GMAC to a more financially strong bank or its plans to help bankrupt and beleaguered Delphi out with its labor costs, might be disappointed.

Delphi declines

The trader said that the auto sector might be more focused on what is - or what is not - going on with Troy, Mich.-based automotive electronics maker Delphi, a former GM unit. He saw the company's 6.55% notes due 2006 at 51.75 bid, 52.5 offered, while its 7 1/8% notes due 2029 were at 52.5 bid, 53.5 offered, each down 1½ points.

A second trader saw all of the Delphi bonds "a little lower on the day" in a 52 bid, 53 offered context.

Over the weekend, the local Detroit Free Press reported that GM and its largest labor union, the United Auto Workers, were in talks on an early-retirement program that would allow Delphi to shift workers back to the automaker as a means of cutting its burdensome labor costs - costs it inherited when it was spun off from GM back in 1999.

The paper reported that the buyout packages under discussion would create job openings for Delphi workers, particularly at five GM assembly plants. The plants apparently are not the same ones GM will be talking about Tuesday - they are located in Arlington, Texas, Fairfax, Kan., Fort Wayne, Ind., Wilmington, Del., and Shreveport, La., the paper said, attributing its information to an unidentified UAW local leader who had been briefed by union executives.

Delphi is looking to cut its labor costs - either by shedding plants and workers by having GM take them on, the way rival Ford Motor Co. took 23 high-cost plants off the hands of its former subsidiary, Visteon Corp., last fall, thus saving the Van Buren Township, Mich.-based company from a likely bankruptcy filing, or by having its workers accept lower wages and benefits than they have been getting. Delphi has set Friday as the deadline for the UAW and other unions to voluntarily accept that truncated compensation package or else see the company ask the bankruptcy court to void its current contracts and impose the harsher terms, which could also include plant closings and job eliminations. The unions have warned that could lead to a strike - which could, in turn, badly hurt GM, which depends heavily for parts on Delphi, still its single largest supplier.

The first trader also noted another story - to the effect that Delphi is looking to sell some of its operations, wondering whether that may have weakened the company's bonds. The company, he said, is reportedly in late-stage talks to sell some of its facilities and operations, including its engine and chassis division and its safety systems business. According to the reports, the operations under consideration for sale would account for as much as half of the company's annual revenues.

"So I don't know if that would happen, where it would leave Delphi," he said.

He further noted that "in both bonds and stocks today [Monday], it seemed like a hollow day - maybe people [in New York and other parts of the blizzard-bashed Northeast] are still getting over the snow storm or what, but it doesn't seem like it would take a hell of a lot to move any of these things today."

Auto names slide

With all of this going on, he suggested, there might be some general anxiety among auto-sector investors, leading to the liquidation of long positions.

He saw Visteon's 8¼% notes due 2010 down 1¼ points at 82.5 bid, 83 offered, while Lear Corp.'s 5¾% notes due 2014 were likewise 1¼ points down at 78.25 bid, 79.25 offered. Ford's 7.45% notes due 2031 were 1½ points lower at 70 bid, 71 offered, while its Ford Motor Credit Co. financial unit's 7% notes due 2013 were also a point in the hole at 88.5 bid, 89 offered.

Another trader, while seeing Ford and GM off, said "the suppliers didn't do very much." He saw the Ford bonds down a point at 70.5 bid, 71.5 offered, although he also saw the Visteon 81/4s at 82 bid, 83 offered, and Dana Corp.'s 7% notes due 2029 at 67 bid, 68 offered, each down a point on the day.

Dura Automotive Systems Inc.'s bonds were meantime unchanged, he said, with the Rochester Hills, Mich.-based components company's 8 5/8% notes due 2012 at 81.5 bid, 82.5 offered and its 9% notes due 2009 at 52.5 bid, 53.5 offered.

Navistar steady after gains

And he saw Navistar International Inc.'s bonds little changed after having recorded handsome gains on Friday on the news that the Warrenville, Ill.-based maker of trucks, buses and heavy engines had scored $1.5 billion of new financing, which might be used in part to take out some bond debt.

Navistar's 7½% notes due 2011 were unchanged at 100.5 bid, 101 offered, while its 6¼% notes due 2012 were at 99 bid, par offered, up half a point.

SunCom climbs

Apart from the autos, "it was a pretty lame day," he said; "the only name that was really up" was SunCom Wireless Holdings Inc. - the old Triton PCS - whose 8¾% notes due 2011 were a point better at 68 bid, 69 offered, though he had seen "no news" on the Bala Cynwyd, Pa.-based wireless service provider.

Also in the telecom sphere, he saw Primus Telecommunications Group Inc.'s bonds down half a point to a point, giving up some of the gains they had notched on Friday after reporting fourth-quarterly numbers that, while showing a wider loss from a year earlier, were a considerable improvement over the third-quarter's red ink.

Primus' 8% notes due 2014 were at 68 bid, 69 offered, while its 12¾% notes due 2009 were at 67 bid, 68 offered.

Maytag Corp.'s 5% notes due 2015 were "loosely quoted" down a point at 87 bid, 88 offered, the trader said, but he added that there didn't seem to be much market reaction to the news that the Justice Department might consider going to court to block the Iowa-based appliance maker's planned merger with larger rival Whirlpool Corp. on antitrust grounds.

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