Nortel bonds gain on asset bid news; WaMu paper active, higher; Ford, GM loans lose some ground

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., Dec. 23 - Distressed bond traders continued to see things wrapping up for the holidays Tuesday, though sources said that the tone remained positive.

One trader said that the market was largely better "across the board," as market players were "covering shorts and filling holes in their portfolios before year-end."

Nortel Networks Corp.'s bonds followed the positive trend, gaining about 3 points on the day. The move came as news reports indicated that the company had received bids for its Metro Ethernet unit, as well as the company as a whole.

Meanwhile, Washington Mutual Inc.'s holding company debt also ended the session about 3 points better. Traders said the bonds were among the day's more active issues, but none could account for the surge in activity.

Investors continued to be concerned about the fate of Ford Motor Co. and General Motors Corp. Market sources saw the automakers' bank debt lose some ground following a round of downgrades on Monday.

The market will close early on Wednesday and will be closed on Thursday for the Christmas holiday.

Nortel gains on asset bid news

Nortel Networks debt got a boost on news reports that it had received offers for its Metro Ethernet division.

One trader said he saw the bonds "up a couple [points] and bid for" on the news. He pegged the 10 1/8% notes due 2013 around 25, up from the low-20s previously.

Another trader called the floating-rate notes due 2011 3 points better around 24, while another source deemed the 10 1/8% notes 6 points firmer at 26 bid.

The Canadian-based communications provider has reportedly received bids for the unit for nearly $1 billion. Nortel put the business - which had previously accounted for 13% of its sales - up for sale in September. Three parties were said to have expressed interest.

Three additional parties had also expressed interest in buying the company as a whole, reports said. No price was given for those offers.

Elsewhere in the sector, Sprint Nextel Corp.'s bonds traded actively, a trader said.

The trader quoted the 6.90% notes due 2019 at 68.5 bid, 69.5 offered and the 6 7/8% notes due 2028 at 55.5 bid, 56.5 offered, up 3 to 4 points.

WaMu paper active, higher

Washington Mutual's holding company paper gained "a bunch" a trader said, though there was "no particular reason" for the move.

The trader called the senior paper, like the 4% notes due 2009, 68 bid, 69 offered. He also saw the subordinated paper, like the 4 5/8% notes due 2014, close around 24.

At another desk, a trader said the bonds were trading between 66 and 68, calling that "up a few points" in active trading.

In other unexplained gains, Nuveen Investments Corp.'s 5% notes due 2010 moved up "quite a bit," a trader said, to around 55 from the low-40s on Friday.

The trader said there was no news to justify the approximately 10-point gain, but noted that "the bonds are shorter than the bank debt so there might be some transaction coming that I am not aware of."

Ford, GM give some ground

Ford Motor and General Motors both saw their term loans come in a few points during the Tuesday trading session, as investors still seem to be concerned over whether the companies can survive their liquidity issues.

Ford, a Dearborn, Mich.-based automaker, saw its term loan quoted at 37½ bid, 40½ offered, down from Monday's levels of 40 bid, 42 offered, a trader said.

And, General Motors, a Detroit-based automaker, saw its term loan quoted at 43 bid, 46 offered, down from 45 bid, 47 offered, the trader continued.

On Monday, both companies were hit with ratings downgrades, however, according to the trader, those downgrades probably did not have much of an impact on the term loan levels.

"People are still skeptical they might go into bankruptcy," the trader added.

Moody's Investors Service announced on Monday that it downgraded the corporate family rating of Ford to Caa3 from Caa1 and that the outlook is negative.

Moody's said that the downgrade reflects the increased risk that Ford will have to undertake some form of balance sheet restructuring in order to achieve the same UAW concessions that General Motors and Chrysler are likely to achieve as a result of the recently approved government bailout loans.

Also on Monday, Standard & Poor's lowered its issue-level ratings on the unsecured debt of General Motors to C from CC.

Standard & Poor's explained that the downgrade reflects General Motors' planned receipt of up to $13.4 billion of U.S. government loans, plus another about $2.5 billion from the Canadian and Ontario governments.

The rating agency said that its expects the loans to be backed by a security package that includes currently unencumbered assets, which would lead to a significant decrease in value for unsecured debtholders in the event of a bankruptcy or payment default.

© 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.