American Axle bonds dive on no news; earnings push down Harrah's, Univision loans, bonds

By Paul Deckelman and Sara Rosenberg

New York, Aug. 8 - American Axle & Manufacturing Holdings Inc.'s 2014 bonds "got crushed" on Friday, in the words of one trader, although there seemed to be no fresh news out that might explain that steep slide.

On the earnings front, bonds and the term loan of Harrah's Entertainment Inc. were in retreat after the world's largest gaming company reported that it slid into the red in the most recent quarter,

Another downsider in both categories was Univision Communications Inc., as the Los Angeles-based Spanish-language media company showed a wider loss from a year ago.

Residential Capital LLC's bonds were seen a little firmer, as the Minneapolis-based residential lender said that it had sufficient capital to run its operations.

American Axle issue slides

A trader saw American Axle & Manufacturing Holdings' 5¼% notes due 2014 "get crushed," despite a lack of fresh news out on the Detroit-based maker of truck axles. He saw the bonds fall into the mid-50s from prior levels in the 60s.

At another desk, those bonds were seen having fallen to 54 bid, up a point from their opening but well down from the 62-ish levels they had occupied earlier in the week. Trading was described as active, and mostly in round lots.

The company's 7 7/8% notes due 2017 were seen having gyrated around in a 5 point range, also in very active big-block trading, before finally coming to rest right back where they had gone home on Thursday, at 57.

Elsewhere in the auto-parts sector, Lear Corp.'s 8½% notes due 2013 were seen having fallen more than 2½ points to close at 80.5.

At another desk, a market source pegged its 5¾% notes due 2014 at just above the 70 level, down nearly a point on the day, on no news.

Delphi Corp.'s second-lien debtor-in-possession financing term loan lost some ground in trading on the back of General Motors Corp. raising some concerns over the company's ability to exit Chapter 11 in a 10-Q that was filed late Thursday, according to a trader.

The second-lien DIP loan was quoted at 83½ bid, 84½ offered, down from 84½ bid, 85½ offered, the trader said.

"GM mentioned that Delphi may not exit. But, it could [also] just be a technical picture. Someone might be short and trying to quote it lower to move it in their favor. Been very quiet," the trader added.

More specifically, in the 10-Q, General Motors said that "the current credit markets, the lack of plan investors, and the challenges facing the auto industry make it difficult for Delphi to emerge from bankruptcy. As a result, it is unlikely that Delphi will emerge from bankruptcy in the near term, and it is possible that it may not emerge successfully or at all."

In other Delphi news, on Friday, the company released second quarter results that did show an improvement on a year-over-year basis.

For the second quarter, the Troy, Mich.-based company reported a net loss of $551 million, or $0.98 per share, compared to a net loss of $821 million, or $1.46 per share, last year.

The company said that the decrease in net loss was due to the absence of charges recorded in the second quarter of 2007 related to a securities and ERISA multi-district litigation settlement and employee termination benefits and other exit costs primarily resulting from the exit of a manufacturing facility in Cadiz, Spain.

Revenues for the quarter were $5.2 billion, down from $6 billion in the second quarter of 2007, with the drop primarily driven by a 28% decrease in GM North America production volume.

GM, Ford bonds take a breather

While investors in the parts-supply sector were having their problems, the same was not true among the OEM names. After several sessions in which the battered bonds of GM were seen having firmed off the lows they recently hit after the Detroit giant reported a $15.5 billion second-quarter loss, one of the largest in its 100-year history, as well as a steep July sales decline, that paper was generally observed to be unchanged Friday.

A trader saw GM's benchmark 8 3/8% bonds due 2033 unchanged at 52.5 bid, 53 offered, while GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 were likewise steady at 54 bid, 55 offered.

Another trader also saw the GM benchmarks unchanged at that 52-53 level, commenting that there had been "some trades - but it wasn't terribly active."

Yet another said it was "kinda quiet in the autos."

Among the auto-finance related issues, GM's 49%-owned affiliate GMAC LLC's 8% bonds due 2031 were seen by a trader unchanged at 55 bid, 57 offered, while its 6 7/8% notes due 2012 were ½ point better at 63. On the downside, a market source quoted GMAC's 5 5/8% notes due 2009 down ¾ point at 92.5, while its 7¼% notes due 2011 were seen down 1½ point at just below the 70 level.

Ford vehicle-financing unit Ford Motor Credit Co.'s 7.80% notes due 2010 gained 1¼ points to end at 75.

Yet another trader said it was "kinda quiet in the autos."

ResCap a little stronger

A trader saw wholly-owned GMAC unit Residential Capital's bonds a little better, quoting the 8 3/8% notes due 2010 up a point from Thursday, although he saw "no real volume."

ResCap said in a Securities and Exchange Commission filing that it should have enough cash to operate for the next 12 months after cutting costs and reducing lending risk, with $1.5 billion of cash readily available to cover operations and maturing debt as of June 30.

However, the company also cautioned that it still expects continued liquidity pressures for the remainder of 2008 and the early part of the 2009, including the obligation to pay off $300 million of bonds coming due in November.

Harrah's loan, bonds lower

Harrah's Entertainment's term loan B-2 and B-3 were softer during the trading session on the company's financial results that included a net loss for the quarter as well as for the first six months of 2008, according to a trader.

The term loan B-2 and B-3 were quoted at 87 bid, 87½ offered, down ½ point from previous levels, the trader said.

A bond trader meantime saw its 10¾% notes due 2016 trade into a 71 bid, down about 4 points, He said that the Las Vegas-based casino giant's other bonds "were all over, down 3 or 4 points" in the wake of the release of the company's second-quarter results.

Another noted the weak numbers and the bonds' lower levels, but said that "they were mostly down over the last couple of days in anticipation of bad numbers." With the numbers out, "they didn't get hit that much" additionally.

He saw its 6½% notes due 2016 trading at 42.5 bid, 43.5 offered - down just a point on the day, though off 4 points on the week.

The bonds fell as Harrah's officially became recognized as the latest victim of the vicious downturn that has gripped the casino industry, which was once thought of as a safe, defensive play during bad economic times. But the combination of high energy prices that have restricted air and car travel and consumer reluctance to frivolously spend money in the face of a worsening economy and uncertain employment prospects, has brought the slowdown to the casinos as much as other business sectors.

For the second quarter, the company reported a net loss of $97.6 million, versus net income of $237.5 million in the year-ago quarter.

Total revenues for the quarter were $2.6 billion, down 3.7% from $2.7 billion in the same period last year. Property EBITDA for the quarter was $646 million, down 9.5% from $714 million last year. Adjusted EBITDA for the quarter was $634 million, down 11.1% from $713 million in the second quarter of 2007.

And, the company's second-quarter income from operations was $323.1 million, compared with $477.9 million last year.

For the six months ended June 30, net loss was $285.4 million, compared with net income of $422.8 million in the first half of 2007. Total revenues were $5.2 billion, down 2.9% from $5.4 billion in the comparable 2007 period. And, income from operations totaled $724.1 million in the 2008 first half, compared with $929.1 million in the prior-year period.

"The first half of the year presented us with the most turbulent economic conditions the casino-entertainment industry has faced in years," the company's chairman, president and chief executive officer, Gary Loveman said in the news release announcing the results. "Customer visitation fell in the second quarter as consumers coped with higher fuel costs, declining asset values, the impact of widespread flooding in the Midwest and other financial challenges.

"During the second quarter, we reduced certain costs in response to reduced demand, but continued to fund for the future," Loveman continued in the release. "We completed the re-branding of Caesars Indiana to Horseshoe Southern Indiana and Grand Tunica to Harrah's Casino Tunica. Today we celebrate the grand opening of the $485 million expansion at Horseshoe Hammond in Northern Indiana, and we remain on track with the expansion of the hotel tower and convention center areas at Caesars Palace in Las Vegas. Further, we have completed the $565 million expansion of Harrah's Atlantic City."

Univision off on mucho red ink

Another bond seen lower after earnings was Univision's 7 7/8% notes due 2011, which slid 2½ points to the 89 range.

Its term loan B also headed lower during Friday's market hours on the company's earnings report, according to a trader.

The term loan B was quoted at 79 3/8 bid, 80 3/8 offered, down from Thursday's levels of 79¾ bid, 80¾ offered, the trader said.

The Spanish-language media company reported a net loss of $100.7 million, compared to a net loss of $19.6 million in the 2007 comparable period. Net revenue for the quarter was $533.1 million, down 4.3% from $557.3 million last year. And, operating income before depreciation and amortization1 decreased 10.9% to $219.9 million in 2008 from $246.8 million in 2007.

For the six months ended June 30, net loss was $266.9 million, compared to net loss of $86.6 million in the same period last year. Net revenue was $991.9 million, up 0.1% from $990.9 million in the first half of 2007. And, operating income before depreciation and amortization decreased 5.8% to $370.8 million in 2008 from $393.5 million in 2007.

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