Automotive arena remains weak, with Delphi, others lower; Consumer-related businesses see decline

By Stephanie N. Rotondo

Portland, Ore., June 27 - After getting beat down on Thursday, market players seemed to take a breather from the distressed bond market Friday.

But some traders reported that there was some stability, despite the overall weaker market.

"Early on, it seemed like things were unchanged, maybe firmer, but by the afternoon, it was kind of weaker," a trader said.

"I don't want to say that things rebounded, but there was some stabilization in some things," said another.

The automotive sector was not so lucky, as anything associated with autos remained soft. Delphi Corp. was called a big mover of the day, losing as much as 4 points. Those losses put pressure on other parts suppliers, such as Metaldyne Corp. Automakers General Motors Corp. and Ford Motor Co. also leaned toward the heavy side.

New consumer confidence data released Friday showed yet another decline in consumer sentiment. It was therefore no surprise that anything consumer related ended the session lower.

After getting hit in the previous session, Rite Aid Corp.'s bonds quieted down, though still ended weaker. Other retailers were also seen on the decline. In the gaming arena, Trump Entertainment Resorts Inc. and Harrah's Operating closed lower.

Automotive arena weak

As the automotive arena continues to struggle in the current economic climate, anything auto related ended the week heavier.

One trader called Delphi "the main mover again," quoting the Troy, Mich.-based automotive parts supplier's bonds down 4 points at "25 across the curve." The trader said weakness in Delphi was also driving Metaldyne paper lower, its 10% notes due 2013 down a point at 50 bid, 52 offered. He added that the 11% subordinated notes due 2012 "didn't trade" but were quoted 2 points lower at 26 bid, 29 offered.

At another desk, a trader saw Delphi's 6.55% notes that were to have matured in 2006 around 23.

Visteon Corp.'s 7% notes due 2014 were deemed 4 points softer at 55 bid.

Among automakers, General Motors' 6¾% notes due 2028 were pegged around 50. The trader said that the issue "hasn't traded in a while" but was down a little bit. He also saw the 6.85% notes coming due in October at 97 bid, 97.5 offered, "kind of where it's been."

Ford Motor's paper has been decidedly weaker of late. The trader said the 7¼% notes due 2011 lost a couple points over the week, ending on Friday in the high-70s. The 5.8% notes due 2009 closed with a 95 handle.

Another source saw Ford's 7% notes due 2013 1 point weaker at 74 bid.

Over the last week, the sector - specifically U.S. automakers - has faced a series of downgrades in both equity and debt as several companies have announced production cuts. On Thursday, a rumor began circulating that Chrysler LLC was looking to file for Chapter 11 protections. The company later issued a statement denying such a plan.

In other news, Dura Automotive Systems Inc. - which has been in bankruptcy since late 2006 - emerged after obtaining a $244 million exit financing facility.

Consumer-related sectors decline

Consumer confidence is nearing its all-time lows, and anything related to consumer spending has therefore taken a hit.

Activity in Rite-Aid's debt died down after a flurry in the previous session, which was caused by disappointing quarterly numbers. A trader said the 6 7/8% notes due 2013 traded a couple points lower at 61.5 bid, 62.5 offered, though he noted that most of the trading was odd lots. The trader also added that the company's new issue was expected to be priced on Monday.

Away from that, the trader said that retailers "took a little beating." He quoted Burlington Coat Factory Warehouse Corp.'s 11 1/8% notes due 2015 at "81 and change." Bon-Ton Stores Inc.'s 10¼% notes due 2014 have been "kind of weak, deservedly so," at 68 bid, 69 offered.

In the gaming arena, Trump Entertainment's 8½% notes due 2015 fell to around 62, while Harrah's Operating's 10¾% notes due 2016 slipped back to its lows at the 82 bid, 83 offered level.

Another trader called Tropicana Entertainment LLC's 9 5/8% notes due 2014 unchanged around 48.

According to the latest study by Reuters/University of Michigan, the Index of Consumer Sentiment dipped to 56.4 in June from 59.8 the month before. The reading marked the third lowest since the index began in 1952.

Those surveyed attributed rising fuel and food prices to their lack of positive feelings. Many said they would delay large purchases, as they were concerned about future income and jobs.

Broad market tidbits

Neff Corp.'s debt "continues to get hurt," a trader said. He pegged the 10% notes due 2015 at 38 bid, 39.5 offered, a point weaker. Another trader saw the notes "just below 40" at 39.

Charter Communications Inc.'s 9.92% notes due 2014 and its 10% notes due 2014 regained a point from the previous session, ending around 57.

VeraSun Energy's 9 7/8% notes due 2012 were quoted around 88, while its 9 3/8% notes due 2017 were seen at 49 bid, 52 offered. Aventine Renewable Energy Holdings' 10% notes due 2017 were "hanging in" the 61.5 bid, 63.5 offered range.

One market source said that Sprint PCS' debt had "defied the market recently," gaining about 1 to 2 points over the week - while the reset of the market fell 2 to 5 points on average. The source said he was not sure what was causing the gains, but speculated that the Virgin Mobile deal could be sparking the belief that there will be more consolidation in that industry.

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