Refco bonds crushed amid new investor fears; Ford tows autos higher

By Paul Deckelman and Sara Rosenberg

New York, Jan. 23 - Refco Inc.'s bonds were being quoted sharply lower Monday on what were described as investor fears of still more bad news ahead for the battered and shattered New York financial services company, now in Chapter 11.

On the upside, the bonds and bank debt of the recently struggling automotive sector got a helping hand from sector bellwether Ford Motor Co., which both announced fourth-quarter earnings that were better than expectations and detailed its long-awaited turnaround plan, which will downsize the Number-Two domestic carmaker by 14 plants and as many as 30,000 employees - painful cuts that most market analysts say are long overdue.

Refco's 9% notes due 2012 "were all over the place," a trader said, quoting those bonds as having lost five points on the session Friday, when they ended at 73.5 bid, 74.5 offered, and then having plunged as low as 62.5 bid, 63.5 offered in Monday's dealings. The bonds came up from that trough to end at 67.5 bid, 68.5 offered, he said - off the low but still down five points on the session.

Another trader saw those bonds "really moving around," falling from recent highs at 78 bid, 80 offered, to lows of 67 bid, 68 offered, before firming slightly to 68 bid, 70 offered.

"They got annihilated," the first trader said, citing "market rumblings that there might be another layer of undisclosed debt, maybe intra-company loans," although he stressed that such scuttlebutt, is it were out there is at this point strictly unverified.

It was the discovery last August of several hundred millions of dollars of bad loans buried deep within the company's balance sheet that led to the ouster of chairman Phillip R. Bennett, who was subsequently charged with securities fraud by federal prosecutors. Loss of investor confidence in the company - amid allegations that client funds had been secretly shifted from protected, regulated accounts to unprotected accounts at an unregulated subsidiary - ultimately led to the company's October bankruptcy filing.

Ford lifts auto names

Elsewhere, the auto sector was seen to have gotten a boost after Ford reported higher-than-expected earnings numbers. That gave a boost to the bank debt of sector names like Meridian Automotive Systems Inc. and Visteon Corp.

Dearborn, Mich.-based parts supplier Meridian's bank debt closed out the session higher by about two points at 85 bid, 86.5 offered, while Visteon - former Ford unit based in Van Buren Township, Mich. - closed out the session higher by about a quarter of a point at 101 bid, 101.5 offered, according to a trader.

Over on the bond side of the ledger, a trader saw Visteon's 8¼% notes due 2010 at 83.75 bid, 84.75 offered, up 1¼ points on the day, while Dana Corp's 6½% notes due 2009 were a point improved at 72 bid, 73 offered, after having lost 10 points during the previous week.

"There was a little bit of recovery in the autos, across the board," the trader said.

Yet another trader, though, saw "not that much" movement in the sector, pegging Visteon's 7% notes unchanged around 76 bid, 77 offered. "You'd think they would be active" on Ford's developments, but they did not budge, he said.

However, he did see Dana "up a couple" of points, bouncing back from its recent weakness, with the Toledo, Ohio-based automotive systems maker's 5.85% notes due 2015 at 65.5 bid, 66.5 offered. Those notes had dropped sharply a week ago after Dana reported a whopping $1.27 billion net loss for the third quarter.

And he saw automotive foam rubber applications maker Foamex International's bonds "better on their number," with its 10¾% notes due 2009 at 88 bid, 89 offered, and its 9 7/8% notes due 2007 two points ahead at 14.5 bid, 15.5 offered.

Bankrupt Troy, Mich.-based electronics maker - and former General Motors Corp. subsidiary - Delphi Corp.'s 6.55% notes, which are scheduled to come due later this year, were seen at 56.25 bid, 57.25 offered, up a point on the day, while its 7 1/8% notes due 2029 were likewise a point better, at 56.75 bid, 57.75 offered.

Among other bankrupt automotive related companies, a trader in distressed bonds saw Troy, Mich.-based automotive interior components maker Collins & Aikman Corp.'s 10¾% notes due 2011 a point better at 33 bid, 34 offered, although Novi, Mich.-based vehicular frames maker Tower Automotive's 12% notes due 2013 were steady at 74 bid, 75 offered.

As for Ford itself, its benchmark 7.45% notes due 2031 were seen by a trader up a point on the session, finishing at 70.5 bid, 71.5 offered. The bonds had gotten as good as 71 bid, 72 offered intra-day, before backing down from that high point to end where they did, a trader said.

However, at another desk, a trader saw the bonds finishing at 70.75 bid, 71.5 offered, which he called up 1½ points on the day. He also saw the company's financial arm, Ford Motor Credit Co., ending 1¼ points better, its 7% notes due 2013 closing at 88.75 bid, 89.5 offered.

Ford reported fourth-quarter net income of $124 million (eight cents a share), up from its year-ago profit of $104 million (six cents a share), and up from Wall Street's expectations of no more than a penny per share. Results were boosted by the sale of the company's Hertz rental car unit and the performance of its luxury brands such as Jaguar, Volvo, Land Rover and Aston-Martin. They make up Ford's Premier Automotive Group, which swung to a profit of $46 million in the period from a year-ago loss of over $255 million.

Excluding special items, fourth quarter after-tax income from continuing operations totaled $511 million (26 cents per share), down from $554 million (28 cents per share) a year ago.

Total sales and revenue in the fourth quarter were $47.6 billion, up from $44.9 billion in the year-ago period.

Full-year 2005 net income was $2 billion ($1.04 per share), down from $3.5 billion ($1.73 per share)in 2004. Excluding special items, 2005 full-year after-tax income from continuing operations totaled $2.5 billion ($1.28 per share) compared to $4.3 billion ($2.11 per share),excluding special items, in 2004.

However, full-year sales and revenue for 2005 was $178.1 billion, up from$171.7 billion a year ago.

Ford followed its positive earnings news with the long-awaited announcement on how the carmaker is going to restore its once-profitable North American automotive business, by radically cutting unneeded capacity and downsizing its workforce. Ford said it will cut up to 30,000 jobs - about 28% of its domestic workforce - and shut 14 manufacturing plants aimed at saving $6 billion by 2010 and restoring its North America auto operations to profitability by 2008. The cuts reduce capacity by 1.2 million units or 26% by 2008. Besides the cuts in the ranks of hourly workers, Ford has moved to enact salaried personnel reductions and a reduction in the executive suites.

Following Ford's example, other automotive names "went along for the ride," a trader said, including Ford's arch-rival, General Motors Corp. GM's 8 3/8% notes due 2033 were seen a point better at 70.25 bid, 71 offered, while its General Motors Acceptance Corp. financing arm's 8% notes due 2031 were up ¾ point at 99.75 bid, 100.5 offered.

GM "was a little better, as things hung in," said another trader, who saw GM's 8 3/8s at 70.5 bid, 71.5 offered.

Airlines drip

Apart from the autos, a bond trader saw airlines "on the weak side," although he said there was "not much going on."

He saw the bankrupt Eagan, Minn.-based Number-Four carrier Northwest Airlines Corp.'s bonds two points down at 36 bid, 38 offered, while the bonds of bankrupt rivals Delta Air Lines Inc. and United Airlines parent UAL Corp stayed at 22 bid, 24 offered.

And he saw Calpine Corp. "down a little," without any specific handle on what's happening with the bankrupt San Jose, Calif.-based power producer. He saw Calpine's 8½% notes due 2008 at 32 bid, 34 offered, and its 7¾% notes due 2009 at 38 bid, 40 offered, each off a point.

Adelphia loans gain

Back in the bank debt market, Adelphia Communications Corp. saw its loan paper rise by about a quarter of a point on Monday as investors are starting to feel good again about the outcome for the banks under the bankruptcy reorganization, according to a trader.

The bankrupt Greenwood Village, Colo., cable operator's Century Old and New bank debt closed out the day quoted at 97.25 bid, 98 offered, a trader said.

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