Neiman Marcus tumbles on poor September sales; GMAC gains, but other autos skid; broad market lower

By Paul Deckelman and Paul A. Harris

New York, Oct. 8 - With the internationally coordinated interest rate cuts by the Federal Reserve and major central banks on Wednesday proving to be no panacea for the shaky financial markets, high yield was broadly lower for yet another session, with numerous issues down multiple points and some names, including Eastman Kodak Co., Dynegy Inc. and Keystone Automotive Operations Inc. lower by double digits despite a lack of fresh negative news. Houston-based Dynegy's shares, in fact, were up by double digits on a percentage basis, even as its bonds were sliding.

Neiman Marcus' bonds were also down sharply, as the Dallas-based operator of upscale department stores like its eponymous flagship operation and Bergdorf Goodman saw its September same-store sales slide badly, as even high-end shoppers began to rein in their spending in the face of the economy's troubles.

The badly battered bonds of GMAC LLC were seen higher, though on no specific news about the Detroit-based automotive and mortgage finance company. But other automotive names like 49% GMAC owner General Motors Corp. and domestic GM arch-rival Ford Motor Co. did not go along for the ride.

There was no news in the high-yield primary market on Wednesday, according to a high-yield syndicate official.

"There is just no bid," the official said. "No one is going to do deals at a time like this."

Market indicators lower

The widely followed CDX index of junk bond performance, which had fallen by ¾ point on Tuesday, lost another ¾ point on Wednesday, a trader said, quoting it at 83 1/8 bid, 83 5/8 offered. The KDP High Yield Daily Index slid 124 basis points to end at 58.43, as its yield ballooned out by 49 bps to 14.24%.

In the broader market, advancing issues again trailed decliners by a margin of better than two to one. Activity, represented by dollar volume, fell by 6% from the levels seen on Tuesday.

"Just when things seemed to be getting better, our friend Mr. [Treasury Secretary Henry] Paulson began to speak," he said, warning investors that there's a long, difficult road ahead.

That was enough to dash whatever good feelings the markets had from the coordinated rate cuts - which included 50 bps cuts in the key U.S. lending rates. After a day of wild gyrations, the bellwether Dow Jones Industrial Average ended down another 189.01 points, or an even 2%, its sixth straight loss. It was almost exactly one year ago, on Oct. 9, 2007, that the widely followed market gauge hit its all-time peak level of 14,164.53, but things have all gone downhill since then, with the index shedding more than a third of its value, nearly 5,000 points, in the interim to close Wednesday at 9,258.10.

Other equity indexes were likewise getting clobbered; the Nasdaq fell 14.55 points, or 0.83%, to finish at 1,740.33, while the Standard & Poor's 500 index was down 11.29 points, or 1.13%, to close at 984.94.

Back in Junkbondland, he said, "There is significant selling going on, he said, "but it's selective - not widespread." He said that it seemed like "there are more accounts than people think sitting on the sidelines with cash, ready to jump in, but nobody wants to be the first, and everybody who sort of stuck their foot in the water" had it chopped off.

"So everyone is extremely gun-shy." He also said that there was considerable hedge-fund liquidation going on, and "when they need to sell, they sell the biggest" portfolio items, which he suggested could be a catalyst behind the sales of such big benchmark names as GM and Ford.

Autos seen mostly lower

A trader said that GMAC's 8% bonds due 2031 "gyrated around" before ending lower in a 33-35 context. "Things really whipped around," he said.

At another desk, however, GMAC's bonds were seen pretty much better across the board, with a source seeing its 6¾% notes due 2014 at 33 bid, up more than 8 points on the day, while its 7¼% notes due 2011 rose 4½ points to 46 bid.

The first trader saw GM's 8 3/8% bonds due 2033 "definitely lower, definitely heavier," but on "not a lot of trading. He said the bonds fell to 28 bid, 30 offered from levels in the low 30s on Tuesday. "The sellers were out there, but we didn't see a lot traded."

He also saw Ford Motors Co.'s 7.45% bonds due 2031 "maybe a little easier "at 32 bid, 34 offered.

Another trader said that GM ""has gotten slaughtered," with the benchmarks falling to 28.5 bid from 31.5 offered. "This is screaming 'bankruptcy'," he declared. "They need to come out with a restructuring of some kind - and very soon."

Among shorter GM paper, the trader saw its 7.20% notes due 2011 down 7 points on the day at 38.75 from 45.75, on $10 million bonds traded.

GMAC - which he noted "had always been considered the safe part of the [GM] capital structure - but now there is no such thing," he said. He said the 8% bonds were down "only" 1½ points at 33.5 bid,. Its 7¾% notes due 2010 dropped to 53.25 bid from prior levels at 56 and its 6¾% notes due 2011 were ½ point lower at 36.5.

Yet another trader saw GM's long bonds fall as low as 26 bid, 30 offered and quoted the Ford bonds at 31 bid, 33 offered.

Luxury retailers sales slide, bonds mixed

Neiman Marcus's notes were solidly lower, after the high-end retailer reported a yawning 12.9% overall slide in its same-store sales - a widely followed key measure of retail industry performance - and a 15.8% plunge in its specialty retailing unit, which includes its flagship Neiman Marcus Stores operation and Bergdorf Goodman.

A trader saw its 10 3/8% notes due 2015 down 6 points at 72 bid, 74 offered, while the 9% notes due 2015 - down nearly 10 points early in the session, at around the 70 level - were closing off 7 points at 72 bid, 74 offered.

Among the kind of pricy baubles Neiman Marcus is known for - costly items which may be a harder sell this year, especially with many big-earning financial types suddenly worrying about their next paychecks - is a $160,000 limited-edition BMW sports car featured in this year's Neiman Marcus Christmas Book catalog. The car package includes a visit to the BMW Welt museum complex in Munich, Germany, in April and a trip along the French Riviera, with stops at Monaco, Nice and Cannes.

Neiman Marcus rival Saks Inc. also saw a double-digit drop in its September same-store numbers - 10.9%. However, a trader said that the New York-based luxury retailer's 9 7/8% notes due 2011 hung in around 99 bid, 100.5 offered - a relative rarity given current market conditions. He said, however, while the Saks bonds "are still there," the notes "just don't trade."

High-flying Pilgrim's Pride

Elsewhere, a trader saw Pilgrim's Pride Corp.'s 8 3/8% notes due 2017 up "maybe 1½ points" at 30.5 bid, 32.5 offered, even as the Pittsburg, Tex.-based poultry and egg producer's NYSE-traded shares jumped 74 cents, or 30.96%, to $3.13, on volume of 4.7 million shares, some 1½ times the usual.

He speculated that it was just belated market reaction to last week's news that lenders had agreed to temporarily ease the company's credit facility covenants to keep it from a default. The bonds, he said, "have been up 4 points over the last couple of days.

Broader market off

With many market names down at least a few points, some went even further, and were down more than 10 points, though generally on no real news. Parts supplier Keystone Automotive's 9¾% notes due 2013 were seen down more than 15 points on the session, a source said, at the 37 level.

Dynegy's 7¾% Dynegy Holdings notes due 2019 were being quoted at 64 bid, down a dozen points, despite the lack of any fresh negative news, and despite a rise in its shares.

Eastman Kodak Co.'s 7¼% notes due 2013 were seen likewise down a dozen points at the 80 bid level.

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