Lehman bonds active; GM unfazed by CEO comments; Neiman, Bon-Ton end higher; broad market firm

By Stephanie N. Rotondo

Portland, Ore., Jan. 7 - The distressed debt market continued to be firm, traders reported Thursday, even as the equity markets zigzagged throughout the session.

Lehman Brothers Holdings Inc.'s debt continued to zing, as market players speculated what could be driving the recent surge in the name.

But General Motors Corp.'s bonds seemed little fazed by comments made by the company's top executive regarding the possibility of a profit for the year, as well as news the company was looking to sell an asset. However, traders also noted that while the bonds were somewhat active, they were not nearly as active as they had been recently.

Meanwhile, Neiman Marcus Group Inc. and Bon-Ton Stores Inc. both released December sales numbers Thursday. Following the release, the retailers' bonds improved some, according to sources.

Lehman bonds active

A trader said that Lehman Brothers Holdings Inc.' paper "has really been a story this week - it's really very active and up several points."

He said that he was "not really sure what the end-game is here. I don't know why" the legacy bonds of the bankrupt New York-based investment bank are attracting such interest. Lehman Brothers collapsed in the fall of 2008 and its operations have largely been absorbed by Barclays Bank.

Another trader said that the Lehman paper was "making a real comeback," suggesting that "people are thinking that some of that mortgage portfolio that the legacy Lehman is long, is going to be doing a little bit better, with everything else up. So the paper is up a couple of points."

He saw the notes having moved from the mid-teens range into the lower 20s, "maybe 22-23 on some of the bigger benchmark-type names."

Even though Lehman as a viable company no longer exists, "the bonds are still outstanding. There's still a claim in bankruptcy that hasn't really been resolved.

"That's why they're up," the first trader agreed, "but only time will tell."

Also in the financial realm, CIT Group Inc.'s 7% notes due 2016 were trading in an 89 to 90 range, according to a trader, while its 7% notes due 2017 were around 89. Among the shorter-dated paper, its 2015 notes were around 91.5 on the bid side.

At another desk, a market source quoted the 2016 bonds up nearly 5 points on the day, pegging them at 92.5 on brisk volume of more than $35 million at mid-afternoon, while the 2017 paper was up more than a point at 89, with more than $25 million having changed hands.

CIT's 7% notes due 2015 were seen up nearly 2 points at just under 91, while its 2014 notes were firm at 92. The 7% notes due 2013 were quoted up about a point at 94 bid.

GM unfazed by CEO comments

General Motors' debt was "not quite as active," a trader said, as it was during Wednesday's session, even as the company's top executive said he was hoping for a profit in 2010.

The trader also deemed the debt unchanged, placing the benchmark 8 3/8% notes due 2033 at 29 bid, 29.5 offered.

Another source pegged the issue - as well as the 7.2% notes due 2011 - at 29 bid, 30 offered, also unchanged.

Ed Whitacre, who took over the chief executive position in December after Fritz Henderson was ousted, reportedly told reporters at an event in Michigan that the Detroit automaker was expecting to post "positive net income" in 2010. Henderson had previously forecast a return to the black in 2011.

In other GM news, the company said it was looking to sell its Nexteer Automotive business, which it purchased back in October.

"GM recognizes the value of the global steering and driveline operations and seeks to realign Nexteer as a wholly independent entity, thus better positioning its business for growth among a wide range of global OEM customers," the company said in a statement.

Elsewhere in the autosphere, Cooper-Standard Automotive Inc.'s 7% notes due 2012 were "up huge again," according to a trader. The bonds had begun to climb on Wednesday and moved up another 5 to 6 points on Thursday to end at 108.5 bid, 109 offered.

There was no news to explain the recent gains. However, "most stuff in autos has been on a tear recently," the trader commented.

Neiman, Bon-Ton end higher

December sales reports from retailers have begun to trickle out and the results have seemingly helped to push some credits in that space higher.

Neiman Marcus Group's bonds, for example, ended "up a couple points," a trader said. He pegged the 10 3/8% and 9% notes due 2015 around "102-ish."

Bon-Ton Stores' 10¼% notes due 2014 were "maybe a little better," the trader added around the 95 level.

For the month of December, Neiman Marcus saw its comparable store sales increase 4.9%. As of Jan. 2, the Dallas-based retailer had $595 million in available liquidity, compared with $330 million the year before.

York, Pa.-based Bon-Ton meantime posted a 2.6% decrease in comparable store sales. Total sales dropped 3% to $511.1 million from $527.2 million the prior year.

"We are pleased with our December sales results, which exceeded expectations despite the snow storms that negatively impacted our performance on key selling days," stated Tony Buccina, vice chairman and president of merchandising, in a press release.

"Our eCommerce business continues to be the fastest growing segment of our company. December end-of-month inventory was down 4% on a comparable store basis; this reduction, along with 22% less clearance merchandise, will benefit our margin. Our inventories reflect fresh, transitional merchandise and we are pleased with our customer's positive response."

The company ended the month with $488 million available under its revolving credit facility.

Among other retailers, Blockbuster Inc.'s 9% notes due 2011 "continue to move up," a trader said, placing the paper "around 60."

Broad market still firm

Among other distressed issues, Energy Future Holdings Inc. - or TXU Corp., as it is more commonly referred to - saw its bonds end "better again," according to a market source. He said the 10¼% notes due 2015 opened around 86 and gained 1 to 2 points throughout the session to end around 88.

Paul Deckelman contributed to this article.

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