AMD bonds jump on JV news; TRW drops on slashed guidance expectations; MGM paper active, softer

By Stephanie N. Rotondo

Portland, Ore., Oct. 7 - While the day started out positive enough, distressed traders reported Tuesday that by the end of the session, the market reversed its direction.

"It was another pretty funky day," said one trader.

"There are more sellers than buyers," said another trader, adding that most buyers were "trying to buy on down bids."

But some names managed to go against the grain. Advanced Micro Devices was one such name.

The chipmaker announced that it would enter into a join venture and split off its factories into a new company. The move was aimed at lowering costs and focusing on design and development of new products. Investors seemed pleased by the news and sent the bonds up more than 10 points.

On the other hand, news that TRW Automotive Holdings Corp. saw its bonds decline by about 10 points. The losses came on the back of the company's announcement that it will cut its yearly forecast.

Meanwhile, MGM Mirage's debt was called active but ended just a touch softer. The bonds weakened even as the company amended its credit agreement to avoid breaching certain covenants.

AMD bonds jump

Advanced Micro Devices announced Tuesday that it will split off its factories into a joint venture with an investor group from Abu Dhabi.

The news gave the chipmaker's bonds a significant boost. One trader said the bonds "stuck their head up for the first time in a while," calling the paper up 12 to 13 points on the day. He pegged the 7¾% notes due 2012 at 73.5 bid, 74.5 offered.

Another trader said action in the name was "pretty volatile," the debt getting as high as 85 before "settling in" in the mid-70s.

Sunnyvale, Calif.-based AMD said the new venture, to be called Foundry Co., would allow the company to clean up its balance sheet as it faces a struggling economy and competition from Intel Corp. In the second quarter, AMD posted losses of $1.19 billion, nearly twice its loss the year before.

But by establishing the new company, AMD will be able to focus more on design and development, a move many companies within the sector have made, the company said in a conference call.

TRW drops on forecast

As the rest of the U.S. automotive sector struggles to get its bearings, TRW Automotive has not been immune. Given that, the company said that it would revise its 2008 outlook and predicted a third-quarter loss.

Investors did not react kindly to the news. One market source called the 7¼% notes due 2017 at 61 bid, or 10 points weaker, while another said he saw the debt in the low-60s.

"All that stuff is better for sale," he said. "It just continues to drift down."

This will be the second time TRW has cut its guidance. In July, the company dropped its full-year earnings forecast to $2.40 per share, versus earlier projections of $2.70 per share, on revenues of $16.4 billion to $16.8 billion.

The updated forecast will be released along with the company's third-quarter results, expected Oct. 30.

Meanwhile, Visteon Corp.'s bonds dropped more than 5 points, just one day after an appeals court dismissed a shareholders lawsuit against the company.

The 7% notes due 2014 closed the day at 28.5 bid, 5.5 points softer.

Shareholders had brought the suit against the parts manufacturer, accusing top executives and an accounting firm of covering up financial problems.

Visteon's former parent, Ford Motor Co., saw its 7.45% notes due 2031 unchanged at 33 bid, 34 offered.

MGM active, lower

MGM Mirage's bonds were deemed active and lower Tuesday, despite news Monday that the company had altered its credit agreement so it would not breach covenants.

A trader quoted the 7½% notes due 2016 and the 7 5/8% notes due 2017 at 67 bid, 68.5 offered. He also saw the 8 3/8% notes due 2011 at 77 bid, 78 offered.

Another trader pegged the 8 3/8% notes at 76 bid, 77 offered and the 7½% notes around 67.

But another source called the 6 5/8% notes due 2015 about 2.5 points better at 92 bid.

Elsewhere in the gaming arena, Harrah's Entertainment LLC's debt regained some ground, traders reported. One trader said the 10¾% notes due 2016 "bucked the trend" of the overall market - that is, declining - and finished the day at 43 bid, 43.5 offered, from around 40 previously.

But another trader said the bonds opened at 44 bid, 45 offered, only to settle back to 41 bid, 42 offered.

Trump Entertainment Resorts Inc.'s 8½% notes due 2015 ended half a point better at 35.25 bid.

Investors return to financials

Given the goings-on in the financial markets, traders reported that investors were staging a return to finance-related names.

A trader called Washington Mutual Inc. senior holding company bonds, like the 4% notes due 2009 or the 4.2% notes due 2011, up half a point or three-quarters, at a generic 61.5 bid, 63.5 offered.

He also saw Lehman Brothers Holdings Inc.'s 6 7/8% notes due 2018 up half a point at 11 bid, 13 offered.

Another trader saw Lehman's 5 5/8% notes due 2013 down nearly a point on the day at 13.25 bid, and saw WaMu's 4% notes down half a point at 61 bid, on $29 million traded.

Meanwhile, iStar Financial Corp.'s 5.95% notes due 2013 fell 4.5 points to 47.5 bid, while MBIA Inc.'s 14% surplus notes due 2033 ended "in the 52 area," which would be up from Monday's levels at 48 to 52.

In the mortgage sector, Residential Capital LLC's 8½% senior notes due 2010 were at 45 bid, 50 offered, while its subordinated 6 3/8% notes due 2010 held in at 17 bid, 19 offered.

AIG unit American General Finance's 4 5/8% notes due 2010 gained more than 5 points on the session, to around 58.5. But AIG's International Lease Finance Corp.'s 6 3/8% notes due 2013 retreated 4 points to the 67 level.

Broad market mixed

Idearc Inc.'s 8% notes due 2016 traded actively, traders said, with one placing the bonds at 23 bid, 24 offered.

"God knows what is going on with that," he said.

Another called the issue "up a little" around 24.

Charter Communications Inc.'s 11% notes due 2015 continued to drift lower, a trader said, quoting the bonds at 55 bid, 56 offered.

Monday's news the Bank of America had settled a dispute regarding allegations shady mortgage practices at Countrywide Financial Corp. sent the latter's bonds up 20 points, the trader added. He said the 6¼% notes due 2016 went from the mid-60s to the mid-80s on the news.

Paul Deckelman contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.