General Motors, Ford pressured by lower sales forecast; Avis, Hertz 'got hurt'; broad market easier

By Stephanie N. Rotondo

Portland, Ore., Oct. 9 - The distressed bond market was again weaker Thursday, as more sellers continue to ravage the market.

"It was kind of a bad day," one market source remarked.

"There is rampant selling," another trader said.

"The market is in complete disarray," said another, likening the current crisis to the telecom meltdown.

"It is not so much a credit issue," he continued, "as liquidation and forced selling.

"Our market is just completely irrational," he added. "Liquidity is at a giant premium."

Facing that irrationality, General Motors Corp. and Ford Motor Co. continue to feel the burn. The automakers' debt was further pressured Thursday by a lower sales forecast from J.D. Power & Associates.

Meanwhile, rental car companies like Avis Budget Group Inc. and Hertz Corp. took a hit. But according to traders, there was no move to explain the declines in the names.

Ford, GM lower

As General Motors' stock hit its lowest mark in 58 years and Ford Motor's equity had its seventh straight day of declines, both companies saw the corporate debt fall as well.

One trader quoted the GM benchmark 8 3/8% notes due 2033 at 23 bid, 26 offered and Ford's 7.45% notes due 2031 at 29 bid, 31 offered.

Another trader placed the GM notes at 27 bid, 30 offered, down 2 points and the Ford bonds at 29 bid, 31 offered, down 1 point. Another market source placed GM's 7 1/8% notes due 2013 at 28 bid, nearly 5 points weaker.

Ford's 7% notes due 2013 slipped 3.5 points to 45 bid.

Losses in the automakers' equity were largely attributed to the end of a short ban. But a new report from J.D. Power & Associates likely had negative effects on both the stock and bonds.

The market researcher estimated that U.S. car and light-truck sales would continue to fall, hitting 13.6 million in 2008 and 13.2 million in 2009. That is a decline from last year's forecast of 16.1 million.

The lowered projections came after U.S. auto sales dropped 27% last month.

And, as sales continue to decline, both GM and Ford are seeing their balance sheet increase in vulnerability.

At GM, the company has not seen a full year in the black since 2004, while Ford has not posted full-year profits since 2005.

Still, of the two, Ford is seen as having more liquidity - at least 9 to 12 quarters of liquidity, according to Gimme Credit analyst Shelly Lombard.

Avis, Hertz get hurt

Car rental companies Avis Budget and Hertz both saw their bonds drop during trading, though there was no news to explain the move.

Avis' 7 5/8% notes due 2014 were seen closing at 44, down from 54 the day before. But a trader said that post-close, the bonds were offered at 40.

"That's getting real serious," he said.

The trader did note that Avis' credit-default swap "had spiked quite a bit a few days ago."

The trader also said that Hertz's paper "got hurt." He pegged the benchmark 8 7/8% notes due 2014 around 74, down from opening levels of 76.5 bid, 78.5 offered and from the previous day at 78 bid, 79 offered. The 10½% notes due 2016 slipped to a low of 68, compared with 73.5 bid, 74.5 offered on Wednesday.

Yet another source placed Hertz's 8 7/8% notes at 76 bid, 4.5 points easier.

Broad market under pressure

"One name that hasn't cratered," according to one trader, was MGM Mirage's 7½% notes due 2016. He called the notes unchanged at 67 bid, 68 offered.

However, Majestic Star Casinos LLC's 9¾% notes due 2011 were offered at 5, the trader said, noting that he had them listed before at 8 bid, 12 offered. He speculated that the senior notes, the 9½% notes due 2010, were likely in the low-40s from 46 bid, 48 offered.

A trader called Lehman Brothers' senior paper a "tad easier" at 12 bid, 13 offered, while another trader called the 6 7/8% notes due 2018 unchanged at 12 bid, 14 offered and the 6 5/8% notes due 2012 half a point softer at 11 bid, 13 offered.

Among other financials, Washington Mutual Inc.'s senior holding company paper, like the 4.2% notes due 2010, slipped 2 points to 54 bid, 57 offered.

GMAC LLC's 7.2% notes due 2009 were seen offered at 37, while its 6 7/8% notes due 2012 gained half a point to 36.5 bid. The benchmark 8% notes due 2031 dropped a point to 29 bid, 31 offered.

Level 3 Communications Inc.'s 9¼% notes due 2014 experienced "a substantial move," a trader said to around 60 from 65 bid, 66 offered previously. Another source pegged that issue around 60, down 5 points, while yet another called the bonds down 4 points at 60 bid, 62 offered.

Charter Communications Inc.'s 8% notes due 2012 fell 4 points to 79 bid.

Idearc Inc.'s 8% notes due 2016 "broke that 20 barrier," a trader said. He said the debt opened at 22.5 bid, 23.5 offered before falling to around 19.5. Another source deemed that down 4 points on the day.

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