GM structure gains ground; US Airways loan up; retailers rebound; Station debt steady on rating watch

By Stephanie N. Rotondo

Portland, Ore., Oct. 20 - Traders called distressed bond investors "cautiously optimistic" Monday, as the overall tone of the market turned positive.

"It was better with the tone of the broader market," the trader said. "But our market is cautiously optimistic and there was not a lot of volume."

"Paper is getting better," a trader said. "Some things were up half a point to 1 point overall," he said.

"The market tried to rally," added another trader. "It wasn't getting a lot of traction, but at least things aren't down 10 points."

General Motors Corp.'s debt structure got a boost during trading. The automaker's paper had been weighed on in the previous week as the market turned sour and retail sales data showed continued declines in automotive sales. But as the market seemed more upbeat and GM announced more cost-savings efforts, the debt rebounded.

Moving from ground to air, US Airways Group Inc.'s term loan moved higher after the airline announced its lenders had agreed to amendment. Under the amendment, the company will be able to pay off some of its outstanding debt.

The retail sector also staged a comeback during the first session of the week. Michael's Stores Inc., which had fallen 10 to 15 points last week, moved up as much as 5 points on the day, while Burlington Coat Factory Warehouse Corp.'s bonds also headed higher.

With still no word of an amendment on its bank debt, Standard & Poor's placed Station Casinos Inc. on Creditwatch negative. But the news did little to affect the company's bonds and traders reported that the debt was largely unchanged.

GM structure gains ground

General Motors' paper headed up in trading, following the positive tone of the overall market.

A trader said GM's debt "definitely seemed to be a little better," calling the various issues up "2 to 3 points across the board." Some, like the 8 3/8% notes due 2033, traded even higher, up 4 points to around 27 from 22 bid, 23 offered previously.

The trader also saw the 8¼% notes due 2023 around 25, 2 points better, and the 9.40% notes due 2021 at 30 from around 22 last week.

At another desk, GM's 7 1/8% notes due 2013 gained 3.5 points to 33 bid, while its GMAC LLC unit's 6 7/8% notes due 2012 likewise gained 3.5 points to 47 bid.

Meanwhile, both GM and its rival, Ford Motor Co., saw their term loans move higher in trading as the cash market in general was better, according to a trader.

Detroit-based GM's term loan was quoted at 44.5 bid, 47.5 offered, up from 43.5 bid, 46.5 offered, the trader said.

And Ford, a Dearborn, Mich.-based automotive company, saw its term loan quoted at 47 bid, 49 offered, up from 45 bid, 47 offered, the trader continued.

Meanwhile, the par cash market overall was up 1 to 2 points on the day, the trader remarked, adding "some things more, some things flat but in general one to two."

Both GM and Ford have been under pressure as auto sales continue to deteriorate. In a video conference last week, GM told its dealers that profits may fall by as much as 18% as the company tries to cut costs and make other changes to ensure its viability.

"We will continue to take the tough but necessary actions to position the company, and you, for future success," said Troy Clarke, GM's president for North America. "While no one can say exactly what the future is going to bring, you can be sure of this: General Motors is here to stay."

GM has begun to implement a restructuring plan that was announced earlier this year. The plan calls for job cuts, as well as other cost-saving measures. On Monday, GM further extended their plan by placing a ban on unscheduled overtime at two of its factories.

US Airways loan gains

US Airways' term loan rallied by a couple of points during Monday's trading session as lenders approved an amendment that will result in some of the debt being repaid, according to a trader.

The term loan was quoted at 56.5 bid, 60.5 offered, up from Friday's levels of 50.5 bid, 53.5 offered, the trader said.

As was previously reported, under the amendment, lenders would get about a 25% paydown at par and in return, the company would be allowed to sell some equipment that acts as collateral.

In addition, lenders were offered a fee of 150 basis points or 75 bps, depending on when they consented to the amendment.

US Airways is a Tempe, Ariz.-based commercial airline.

Retailers try to rally

Retailers "came back a little," a trader said, after being weighed down significantly the previous week.

The trader said Michael's Stores' 10% notes due 2014 closed at 49 bid, 50 offered, a 5 point gain on the day. However, the trader noted that the bonds had been pushed down 10 to 15 points over the course of the last week.

The trader also said that Burlington Coat Factory's 11 1/8% notes due 2015 pared some of the losses incurred after a conference call on Friday. He saw the paper finish Monday at 38 bid, up from "33-ish" on Friday.

The Burlington, N.J.-based retailer released its first-quarter results on Thursday and held a conference call Friday to discuss the numbers. The trader called the numbers "decent," opining that the previous declines were more in sympathy with the general market than anything else.

At another desk, Michaels' 10% notes were deemed "up a couple points" around 49, while Claire's Stores Inc.'s 10½% notes due 2017 were 2 points firmer at 22. Bon-Ton Stores Inc.'s 10¼% notes due 2014 were also considered "a little better" at 19.5.

Elsewhere, Rite Aid Corp.'s 8 5/8% notes due 2015 were seen up 3 points at 37.5 bid. Blockbuster Inc.'s 9% notes due 2012 were pegged at 56 bid, 57 offered.

Station steady, on watch

Station Casinos' bonds were called "kind of active" and "almost unchanged" by a trader after Standard & Poor's placed the gaming operator on watch.

The trader quoted the 7¾% notes due 2016 at 33 bid, 33.5 offered, which he called "not much different." The 6% notes due 2012 were down slightly at 34 bid, 34.75 offered from 35 bid, 35.5 offered previously.

Another trader also saw the 7¾% notes at 33, adding, "It doesn't look much changed."

S&P placed its rating on Station on Creditwatch negative, citing concerns about the company's ability to amend its bank covenants. So far, Station has not announced any amendments to its facilities, but S&P believes an amendment will come in the near term. Without it, the company could breach covenants by the end of the first quarter of 2009.

Broad market pares losses

Idearc Inc.'s 8% notes due 2016 inched up to 21 bid, 22 offered from around 19 on Friday.

Lehman Brothers Holdings Inc.'s senior paper was likewise better, trading around 11.5.

Spheris Inc.'s 11% notes due 2012 were quoted at 40 bid, 47 offered.

A trader saw Swift Transportation Co. Inc.'s 12½% notes due 2017 2 points better at 24 bid.

Charter Communications Inc.'s 8 3/8% notes due 2014 firmed by 1 point to 70 bid.

Sara Rosenberg and 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.