ResCap, GMAC softer after downgrade; Radio One dips; Delphi better, Metaldyne lower

By Stephanie N. Rotondo

Portland, Ore., Feb. 22 - As the short holiday week wound down, many market players retreated from their desks -or did not make it to them at all - because of snowfall in New York.

"The snow was screwing everything up," a trader lamented, noting that the weather caused some to not even make it in to the office.

Even those that did make it in did not stick around too long. Another trader said a good portion of market participants left by noon.

"If you didn't get business done before then, you were out of luck," he said. "Everyone was afraid of everything - the snow being everything."

That made for a relatively inactive afternoon.

"I wish I was doing more," said another trader, who agreed that it had been quiet over the last few sessions. The trader noted that there were "tighter spreads" in morning trading.

Still, the tightening of the marketplace has not done much in the way of inspiring investors to get involved in distressed credits.

"Basically, the name of the game right now is quality," the trader said.

And speaking of quality, two mortgage lenders, Residential Capital LLC and its parent company, GMAC LLC, had theirs cut, so to speak. Standard & Poor's downgraded both entities, and their debt slipped - albeit slightly - during trading.

Meanwhile, Radio One Inc.'s earnings came out Thursday. As a result, a trader saw the broadcasting company's bonds down as much as 10 points.

Comments from Nissan's chief executive did not necessarily impact the distressed automotive industry. Warnings of a recession - at least in that sector - did little damage, as Delphi Corp.'s debt was a little better, though Metaldyne Inc.'s bonds were lower.

ResCap, GMAC dip on downgrade

Sometimes, a child's actions do reflect poorly on a parent. So GMAC learned Friday, after S&P cut its rating, along with that of Residential Capital.

The news prompted muted reaction in the market. A trader called ResCap paper "a little lower," its 6 3/8% notes due 2010 at 61.5 and its 10% notes due 2011 trading in the high-50s.

GMAC bonds were also weaker, though slightly less so than ResCap. A trader quoted the 8% notes due 2031 at 78.5 bid, 79 offered, down from around 79.5 the previous session.

However, another trader called GMAC's 8% bonds unchanged at 78 bid, 80 offered and did not see any levels on ResCap.

At another desk, the GMAC benchmarks were measured down a quarter of a point at 79.5 bid. ResCap's 8 3/8% notes due 2015 were down half a point at 59 bid, while its 6% notes due 2011 were quoted at 60 bid.

In the credit-default swaps market, the cost of protecting holders of GMAC debt against a default widened by about 5 basis points on the day to 910 bps bid, 915 bps offered. ResCap's CDS costs were meantime seen unchanged at 36% upfront plus 500 bps annually.

Another trader said there was "very little flow" in either of those names.

"The bonds didn't really sell off that much," the trader noted. "I think the market was kind of anticipating [the downgrade]."

ResCap's rating was dropped by S&P to B/C from BB+/B and GMAC's to B+/C from BB+/B. Both had a negative outlook.

The ratings agency attributed its cuts to challenges throughout the mortgage market and the declining value of GMAC's stake in ResCap.

According to a Bloomberg report, a GMAC spokesperson said the company was "extremely disappointed" in the action.

But questions regarding whether GMAC would bail out its flailing offspring - again - were somewhat answered Friday. News reports indicated that GMAC agreed to lend ResCap $750 million

Radio One slips on numbers

Radio broadcasting company Radio One reported its fourth-quarter results on Thursday, and one trader called the numbers "not good."

The less-than-stellar figures propelled the company's debt down 8 to 10 points, the trader said, its 6 3/8% notes due 2013 "wrapped around" the 70 bid, 72 offered range.

The Washington, D.C.-based company posted a $386.4 million loss on $78.1 million in revenue. For the same period in the previous year, the loss was $25.5 million on $82.3 million in revenue.

Elsewhere in the media sector, Young Broadcasting Corp. also released news, announcing that it will cut jobs as a way to decrease costs.

Still, a trader called the news "stuff nobody cares about."

That might have been the case, as there was little action in the name. The trader pegged the 10% notes due 2011 at 65 bid, 65.5 offered.

Delphi better, Metaldyne lower

While the broader marketplace ponders the question of "Are we in a recession or aren't we?" Nissan's chief executive had no qualms confirming that we are indeed in a recession - at least, the automotive industry is.

According to an Associated Press report, Carlos Ghosn said rising material costs are putting unneeded pressure on carmakers.

Those pressures likely include parts makers, as well, as they rely on the same types of materials to produce their products.

But Ghosn's comments did not seem to surprise investors. Those involved with distressed automotive parts suppliers are likely already aware of the concerns facing the industry as a whole.

A trader said there was "not a lot of action" in the autosphere, though Delphi's bonds - which tend to trade in line with one another - were "a little better" at 35 bid, 36 offered.

On the opposite side, Metaldyne paper was deemed weaker, its 11% notes due 2012 at 44 bid, 45 offered. The trader noted there were mostly just odd lot trades in that name.

Another trader called the 11% notes down a point at 45.5 bid, 46.5 offered.

Broad market mixed

There was no news out, but a trader saw MetroPCS's 9¼% notes due 2014 slip 1 to 2 points to around 86. Another trader added, "That name has been sliding for a while."

Yet another source pegged those bonds down a point to 86.5 bid, 87.5 offered.

Equityholders and noteholders of Tembec Inc. have agreed to support the company's recapitalization plan. That news did nothing to spark movement in the debt, which has been relatively quiet since the company first announced the plan. A trader said the 8 5/8% notes due 2009 printed around 31.

Abitibi Consolidated Inc., more affectionately referred to as AbitibiBowater, saw its debt try to maintain the momentum gained in the previous sessions. But the bonds only managed to close unchanged, a trader said. He said the 6.95% notes due 2008 opened the day with a 95 bid after closing Thursday's session at 92.5 bid, 94.5 offered. Though there were some trades around 94, he saw the issue end the day at 92.5 bid, 93.5 offered.

Still, with a 45-day maturity, the trader was optimistic on that paper.

"If you like them, buy them, if you think they can get a [refinancing]," he said. "At least those bonds will get paid."

At another desk, the 6½% notes due 2013 were up 1.5 points at 67 bid.

Tribune Corp.'s 4 7/8% notes due 2010 were seen up more than 3 points at the 56 level.

Idearc Inc.'s 8% notes due 2016 were unchanged at 68.25.

Paul Deckelman contributed to this article.

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