Boyd Gaming paper continues to pop; General Motors numbers weigh on automaker, pressure Delphi

By Stephanie N. Rotondo

Portland, Ore., Aug. 1 - Investors reacted kindly to Boyd Gaming Corp.'s quarterly results, giving the company's bonds an additional boost.

The Las Vegas-based casino operator has seen its bonds steadily climb in recent sessions. The debt began to really pop ahead of the numbers on Thursday, gaining 3 to 4 points. The notes then marched up at least that amount on Friday.

In the automotive sector, General Motors Corp. reported its third largest quarterly loss in its history, dragging its debt structure down. Delphi Corp.'s debt went along for the ride.

GM's bank debt fell about a deuce, while Delphi's debtor-in-possession loan was likewise down 2 points. The automaker's bonds fell at least 4 points, as well as those of automotive parts supplier Delphi.

Generally, the market seemed weaker, traders reported. As the stock market continued to decline, market players seemed to back away, leaving trading volumes thin. One trader also pointed out that the final session of the week fell on the first day of the month, which could account for the overall tone.

Boyd paper continues to pop

Boyd Gaming paper continued to drive up during trading, boosted by an earnings release that beat expectations.

The gaming operator's debt "popped a lot," a trader said, "but backed off a little bit." The trader said the bonds were up as much as 5 points during the session. He quoted the 7¾% notes due 2012 at 86 bid, 87 offered versus levels around 83 on Thursday. Another trader echoed that market.

"They are easily up 3 to 4 points today," the latter said. "And they were up 3 to 4 points yesterday."

The first trader also saw the 6¾% notes due 2014 up at 76 bid, 77 offered from 73.5 previously. The trader said the bonds got as good as 78 on the day.

For the second quarter, Boyd reported income from continuing operations at $21.7 million, down from $22.9 million the year before. Its adjusted income increased to $26.4 million. Earnings came in line with, or in some cases above, estimates.

However, revenue fell 10% to $460.8 million from $511.4 million.

But investors seemed cheered by the fact that the company chose to delay construction on its Echelon mega-facility. The company said it elected to go that route due to a "difficult" and "challenging" market.

"It is kind of hard to build a mega-facility what with all the declines in Las Vegas," said one market source.

Boyd also chose to suspend its stock dividend program, and it increased the amount of its stock repurchase to $100 million.

In the rest of the gaming sector, names were deemed generally weaker.

One trader said Station Casinos' was trading "at their lows," the 7¾% notes due 2016 at 66.5 bid, 67.5 offered and the 6 7/8% notes due 2016 at 42 offered.

The trader also said that Trump Entertainment Resorts Inc.'s 8½% notes due 2015 "broke 50 last night, or maybe early this morning," closing the day lower at 48 bid, 49 offered.

GM loses ground, steamrolls Delphi

General Motors' term loan fell following the release of second-quarter results and July sales numbers, which also brought Delphi's second-lien DIP financing term loan lower, a trader said.

GM's term loan was quoted at 75½ bid, 76½ offered, down from Thursday's levels of 77¾ bid, 78¾ offered, the trader said.

And Delphi, a Troy, Mich.-based automotive electronics manufacturer, saw its second-lien DIP term loan quoted at 86 bid, 87 offered, down from 88 bid, 89 offered, the trader added.

In the bonds, a trader quoted GM's 7.2% notes due 2011 at 61 bid, 62 offered, down from trading levels between 65 and 68 previously. At another desk, Delphi's bonds were generically pegged at 12 bid, 13 offered.

For the second quarter, GM reported a net loss of $15.5 billion, or $27.33 per share, including significant charges and special items, compared with net income from continuing operations of $784 million, or $1.37 per share, in the second quarter of 2007.

On an adjusted basis, the company posted a net loss of $6.3 billion, or $11.21 per share, compared with net income from continuing operations of $1.3 billion, or $2.29 per share, in the same period last year.

Revenue for the quarter was $38.2 billion, down from $46.7 billion in the year-ago quarter.

The second-quarter loss was primarily driven by several factors, including significant losses in GM North America due to continuing U.S. industry volume declines and shifts in vehicle mix, the long strike at American Axle and large lease-related charges, a number of special charges associated with ongoing restructuring actions, continued losses at GMAC Financial Services, and updated estimates regarding recoveries and expectations of assumed benefit obligations in the Delphi bankruptcy.

"As our recent product, capacity and liquidity actions clearly demonstrate, we are reacting rapidly to the challenges facing the U.S. economy and auto market, and we continue to take the aggressive steps necessary to transform our U.S. operations," said Rick Wagoner, chairman and chief executive officer, in a news release. "We have the right plan for GM, driven by great products, building strong brands, fuel-economy technology leadership and taking full advantage of global growth opportunities."

Focusing on liquidity, the Detroit-based automotive company's cash, marketable securities and readily available assets of the Voluntary Employees' Beneficiary Association trust totaled $21 billion on June 30, down from $23.9 billion on March 31.

The change in liquidity reflects negative adjusted operating cash flow of $3.6 billion in the second quarter, driven primarily by weaker results in GM North America.

As of June 30, the company had access to about $26 billion in liquidity, including undrawn, committed U.S. credit facilities of about $5 billion.

In July, GM provided notice to draw $1 billion under its secured revolving credit facility.

As was previously reported, the company is taking operating and related actions to improve cash flow by about $10 billion through the end of 2009. In addition, the company has outlined plans to raise about $5 billion through capital markets activities and asset sales.

GM reiterated on Friday that it is confident that these initiatives, along with its current cash position and $4 billion to $5 billion of committed U.S. credit lines, will provide it with ample liquidity to meet its operational needs through 2009.

Meanwhile, regarding sales results, the company delivered 235,184 vehicles in the United States in July, down 26.7% from last year. Overall, the company's truck sales in July declined 41.5%.

The company blamed weak industry conditions caused by a challenging U.S. economic environment, higher fuel prices and inventory shortages in critical segments such as compact cars for the overall sales decline for the month.

Larger loss disappoints

In an afternoon report, Gimme Credit analyst Shelly Lombard expressed disappointment over the larger-than-expected quarterly loss. However, she acknowledged that the American Axle strike affected the quarter and recent cost-cutting endeavors have not yet begun to show up on the company's balance sheet.

Still, "the bonds have traded down to new lows but we still don't believe it's time to buy because we see weak near-term results and no positive catalysts."

Meanwhile, GM's lending arm, GMAC LLC, saw its debt slip, but "not too bad," in the words of one source. The source saw GMAC's 6¾% notes due 2014 around 56, down from 58 previously.

GMAC reported its quarterly results on Thursday. For the period, GMAC posted a loss of more than $2 billion. Over half that amount was attributed to Residential Capital LLC, GMAC's money-losing offspring. ResCap alone reported a loss of $1.86 billion. Still, GMAC's management team said it remained committed to supporting its subsidiary.

Elsewhere in the autosphere, Ford Motor Co.'s term loan receded in trading after the company revealed July sales results that showed a steep decline on a year-over-year basis.

The term loan was quoted at 77 1/8 bid, 78 1/8 offered, down from 78¾ bid, 79¼ offered, the trader said.

For July, Ford's total sales were 161,530, down 14.9% from 189,920 last year. Total truck sales fell to 99,229, down 22.1% from 127,309 last year.

Broad market weaker

Idearc Inc.'s 8% notes due 2016 continued to get whipped, losing another 1 to 2 points to end at 41.5 bid, 42.5 offered.

"They seem to go down 1 to 2 points a day," a trader said. He added that he thought the bonds had lost a good 20 points since late June.

Among retailers, a trader said Claire's Stores Inc. "just continues to get pummeled." He saw the 10½% notes due 2017 trading around 30, while the 9¼% notes due 2015 were at 43 bid, 44 offered.

"Retailers continue to get quoted lower, but volume is pretty light," the trader said.

Residential Capital LLC's 8½% notes due 2010 were called unchanged at 71 bid, 72 offered.

Sara Rosenberg contributed to this article.

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