Six Flags up on interim numbers; GM stock jump no help to bonds; Pliant pounded; funds add $54 million

By Paul Deckelman

New York, Aug. 14 - Six Flags Inc.'s bonds were solidly higher after the New York-based theme park operator announced quarter-to-date numbers that showed attendance at its parks, spending by park visitors and overall revenues up from year-ago levels - improvements which the company's chief executive officer said constitute a "terrific" start to the current third quarter, which runs through Sept. 30.

General Motors Corp.'s bonds were seen mostly spinning their wheels around the levels at which they had traded on Wednesday, failing to hitch a ride with the company's shares, which rose smartly on a combination of a generally higher stock market, GM's plans to accelerate projected savings from cost-cutting measures, and signs that GM is making progress in working on its electric-powered Chevrolet Volt hybrid model - the car GM is staking its future upon as it tries to move away from its historic image as a producer of massive gas-guzzlers.

Pliant Corp.'s bonds fell after the Schaumburg, Ill.-based plastic packaging maker reported a sharply wider second-quarter loss. Sector peer Constar International Inc. was also lower after reporting less-than-stellar quarterly results.

On the upside, Realogy Corp.'s bonds continued to rise, riding the momentum they've had since the company reported relatively decent numbers - given the troubles besetting the real estate industry - earlier in the week.

In the new-deal market, several primaryside players said that "absolutely" nothing was going on, leaving would-be investors to speculate about what kind of deals may be in the pipeline but won't be seen until after the Labor Day holiday break at the earliest.

Funds rise by $54 million on week

And as trading was winding down for the session, market participants familiar with the high yield mutual fund flow statistics generated by AMG Data Services of Arcata, Calif., said that in the week ended Wednesday $53.5 million more came into the weekly-reporting funds than left them. It was the fourth consecutive inflow, including the $95.8 million cash infusion seen in the previous week, ended Aug. 6. Over the past four weeks, inflows have totaled $328.7 million, according to a Prospect News analysis of the AMG figures.

There have been five inflows and four outflows seen during the last nine weeks, dating back to the week ended June 18. During that time, the funds have lost a net of $484.976 million, according to the Prospect News analysis. Before that had come a run of 11 consecutive weekly inflows, stretching from early April through mid-June, during which time $3 billion of inflows were recorded, according to the analysis. Before April, outflows had been recorded in most weeks, with net outflows totaling around $1 billion.

With the calendar third quarter now well underway, inflows, after that slow start, remain solidly ahead, with 20 inflows versus 13 outflows seen in the 33 weeks since the start of 2008, according to the analysis. According to market sources, net inflows from the weekly-reporting funds since the start of the year, excluding distributions but including previous retroactive adjustments and revisions, are now $1.448 billion, up from $1.395 billion the previous week. At its peak, the 2008 net inflow totaled $1.933 billion in the week ended June 11, the final week of the 11-week run of straight inflows.

Junk mutual funds which report on a monthly basis, rather than week-by-week, were meantime seen to have lost $7.5 million on the latest week, bringing their year-to-date inflow down slightly to $2.91 billion. On an aggregate basis, combining the year-to-date fund flow totals of both the weekly- and the monthly-reporting funds, $4.358 billion more has come into them since the start of the year than has exited.

The flow of money into and out of the junk bond funds is seen as a generally reliable market barometer of overall high yield market liquidity trends - although they only comprise 10% to 15% of the total monies floating around the high yield universe, far less than they used to - because there is no reporting mechanism to track the movements of other, larger sources of junk market cash, such as insurance companies, pension funds and, more recently, hedge funds.

Market indicators edge lower

Back among the established issues, a trader said Thursday that the widely followed CDX index of junk bond performance was unchanged at 92 9/16 bid, 92¾ offered. The KDP High Yield Daily Index meantime inched down by 2 basis points to end at 70.47, while its yield crept up by 2 bps to 10.58%.

In the broader market, advancing issues led decliners by a better-than nine-to-eight margin. Activity, represented by dollar volume, fell by 28% from the levels seen on Wednesday.

Six Flags fly on figures

Six Flags investors were enjoying "more flags, more fun!" - the company's ubiquitous new TV advertising mantra - after it released revenue, attendance and customer spending figures at about the halfway point of the current third quarter; the numbers show gains in all three important performance measures from a year ago, prompting its chief executive officer, Marc Shapiro, to declare that Six Flags is off to "a terrific start" in the current quarter.

A trader saw its 9 5/8% notes due 2014 "up almost 3 or 4 points" at 55.5 bid, 56 offered, while seeing its 9¾% notes due 2013 going home at 58, a 2 point jump on the day, while its 8 7/8% notes due 2010 pushed up to 84 bid, 84.5 offered from Wednesday's finish at 82. The trader saw no activity in the new 12¼% notes due 2016, which the company issued in June as part of its exchange offer taking out a portion of the other three classes of bonds.

Another trader saw the 9 5/8s gain 3¼ points to close at 56, while the 8 7/8s rose 2 1/8 points to finish at 84.625.

Yet another source estimated the 8 7/8s up a deuce at 84.625, while the 9 5/8s were up a trey at 56.5.

Six Flag's New York Stock Exchange-traded shares meantime zoomed by as much as 20% during the session before finally coming down from that peak to close up 9.71%, or 10 cents, to $1.13, on volume of 3.4 million, nearly double the usual turnover.

The company announced that as of Tuesday - about the halfway point of the quarter that began on July 1 and that will wrap up on Sept. 30 - revenue had increased by $23.5 million, or 7.6%, versus the year before, with attendance up by 5.1% from a year ago, or 407,000 patrons, rising to 8.43 million guests. Not only were there more visitors, but those visitors were spending more money at the company's 20 theme, water and animal-safari parks - about 1.6%, or $38.56 on average, between admissions, food and other spending. Counting in the money Six Flags takes in from corporate sources such as sponsorship, licensing and other fees, average total revenue per visitor rose about 2.4% to $39.55.

The stronger third-quarter numbers, so far, come on top of better performance in the first half of the year, including the unexpected profit Six Flags reported for the second quarter. Company executives, led by CEO Shapiro, have declared that the company is on-track to be free cash flow-positive this year - something it has never accomplished before. Shapiro said Thursday that the partial-quarter results represent a "terrific start for the quarter and it demonstrates that the company's strategic, multi-year commitment to improving the quality of our guest experience and expanding our core business can bring about sustained long-term growth."

Six Flags also said that during the month of July, it continued to score high marks in customer satisfaction in various key areas, such as ride safety, park cleanliness, employee service and speed of lines at attractions, according to a market research survey the company commissioned.

GM bonds fail to follow stocks upward

Elsewhere, General Motors' bonds - which fell on Wednesday, along with its shares, after the Detroit giant's credit ratings were downgraded by Moody's Investors Service - remained stuck in that same rut on Thursday, even though the company's shares raced upward, given a boost by a combination of generally better stocks, GM's speeded-up belt-tightening campaign and positive developments in GM's efforts to develop its Chevy Volt car model.

A trader saw its benchmark 8 3/8% bonds due 2033 down ½ point in round-lot trading to 52.5 bid. However, another trader saw those bonds up a point, quoting them at 52 bid, 53.5 offered. Yet another trader saw the bonds up 1 point at 53.5 bid, 54.5 offered.

GM's 7 1/8% notes due 2013 were seen by a market source up ½ point to 58, while its 49%-owned GMAC LLC auto finance unit's 6 7/8% notes due 2012 lost a point to 61.

However, a trader at another shop saw GMAC's 8% bonds due 2031 up 1 point at 56 bid, 57 offered. But another saw the GMAC long bonds down ¾ point at 56.25 bid, 57 offered, while the parent's 8 3/8s dipped ½ point to 52 bid, 52.5 offered.

"Both backed up about ½ point," that trader said, "but there were not a lot of trades to go on," noting just two round-lot trades in the 8 3/8% bonds around the 52 mark all day.

Yet another market source saw the 8 3/8 having opened down a point at 52, and then having remained in that 52-53 context.

Its 7.20% notes due 2011 were seen mostly traded in a 65-66 context, in busy dealings of mostly odd lots, up about ½ point from the 65 level where the bonds had ended on Wednesday.

While the bonds were mostly idling in neutral, GM's NYSE-traded shares accelerated by as much as 15.3% intraday, before finally closing up 10.62%, or $1.09, at $11.35. Volume of 32.8 million shares was up about 14% from the norm.

Good news for GM

Analysts said those shares - though not the bonds - were towed higher by a combination of factors - the generally stronger stock market, strengthened by the continued slide in oil prices, positive comments from GM executives on the company's efforts to cut costs, generate savings and boost liquidity, and the good news regarding the Volt.

Last month, GM outlined its plans to restructure the way it does business, with a goal of saving $10 billion through 2009, with almost all of those savings slated for next year. However, company chief financial officer Ray Young said Thursday that GM is looking to speed up its timeline to see more of those savings this year, rather than next, on its way to the overall goal of boosting its liquidity by as much as $17 billon.

However, Young acknowledged that to do that, GM might have to think of a new plan for GMAC, as well as its plan to create an independent union retiree health-care fund.

GM also got a boost on the financial front Thursday as J.P. Morgan Chase & Co. equity analyst Himanshu Patel downplayed the likelihood of the world's largest carmaker going bankrupt - a possibility which has recently been bandied about in the financial press, with Merrill Lynch saying recently that such a once-unthinkable scenario was "not impossible" if auto market conditions continue to deteriorate.

Morgan's Patel, on the other hand, wrote in a research report that "the chances of a GM bankruptcy during this auto cycle are lower than what is currently discounted in the marketplace." Even while acknowledging what he called "many obvious concerns regarding the company's balance sheet and near-term operating outlook," Patel kept the stock as an "overweight."

Meanwhile, at an automotive conference in Traverse City, Mich., GM's design director displayed some pictures of what the aerodynamically designed front end of the much-hyped Volt would look like, and the company said that it would finalize the design by mid-September in hopes of having 50 prototypes with production-ready parts by the end of 2008.

GM plans to introduce the hybrid Volt - the centerpiece of its efforts to transition away from being known primarily for its bulky gas-guzzlers like its humongous Hummer and other large SUVs - in fall 2010. It is initially designing the car to run for 40 miles on a lithium-ion battery pack that can be recharged either during the operation of its gasoline engine, or by being plugged in to a standard external electric outlet.

Ford motors upward

While GM's bonds mostly gyrated in a narrow range, domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 were seen by a trader a point better at 53 bid, 55 offered, while another also saw them up a point, at 54 bid, 55 offered. A third saw them up as much as 1 5/8 points on the day at 55.5

A market source saw the company's Ford Motor Credit Co. auto-finance unit do even better, with its 9¾% notes due 2010 finishing up more than 3 points at just below the 90 level. However, while another source saw the parent company's 7.45s up more than 1½ points at 55.5, he also saw Ford Credit's 9 7/8% notes due 2011 down a point at 81 bid

Plastic packagers take a pounding

On the earnings front, a trader said that Pliant's bonds "got hit" after the privately held plastic packaging maker filed its latest quarterly report with the SEC.

He saw its 11 1/8% notes due 2009 at 75 bid, well down from the most recent previous round-lot trade at 82.25 on Monday.

Pliant - which makes plastic wrap used to package a variety of consumer goods and industrial products - reported that in the second quarter, its net loss expanded to $24.329 million from $5.61 million a year earlier, even as net sales rose to $287.6 million from $277 million a year ago.

A trader meanwhile said Constar International "is not so good," after the Philadelphia-based manufacturer of plastic bottles and other containers came out with numbers during the morning.

Its 11% notes due 2012 were being offered at 40, down from Wednesday's odd-lot levels around 43 bid, 44 offered, and well down from a round-lot trade at 45 on Tuesday, the victim of "a steady slide," said the trader, who also characterized the numbers as "not terribly bad - but unit volume was down."

Constar's second-quarter loss widened to $5.02 million, or 41 cents a share, from $4.85 million, or 39 cents a share, a year ago. Sales had only inched 2% higher to $242.3 million. The company said the results were disappointing primarily due to a huge hike in energy costs and the weaker-than-expected demand for carbonated soft drinks.

Realogy roll continues

A trader saw Realogy's bonds higher, "after falling apart a couple of days ago," quoting its 11% notes due 2014 at 48 bid, 49.5 offered, up from 46 bid, 47 offered on Wednesday, while its 12 3/8% notes due 2015 were about ½ point higher at 46.5 bid, 48.5 offered, and well above Wednesday's earlier levels at 44.

A second trader said the 11s closed at 47.5, up ½ point on the day but down 2 points from its high level of the day at 49.5. Its 10½% notes due 2014 gained 2 points on the session to end at 60.75.

Those bonds have been improving over the past several sessions after the Parsippany, N.J.-based real estate and relocation services provider said earlier in the week that second-quarter net revenue totaled $1.4 billion. EBITDA was $161 million, and its net loss was $27 million.

"In the midst of a very difficult housing market, Realogy remains focused on increasing productivity and reducing our operating costs to enhance our ability to manage through this protracted downturn and, ultimately, be well positioned to capitalize on the real estate market when it recovers," Richard A. Smith, Realogy's president and CEO, said when the earnings were released.

New-dealers ponder pipeline deals

In the primary market, several sources said that "absolutely" nothing was taking place; the last forward calendar deal, Caribbean Restaurants LLC's $149 million offering of four-year notes, successfully priced on Wednesday, although the company had to price it at a 2 point discount in order to sweeten the already-robust 14¼% coupon to a yield of almost 15%, well outside of pre-deal market price talk heard earlier in the week.

With Caribbean Restaurants now out of the way, and the disappearance from the forward calendar of two other deals that had been considered "day-to-day" - the Allis-Chalmers Energy Inc. $350 million 10-year issue that was spiked once the Houston-based oilfield services company's deal to acquire Bronco Drilling Co. Inc. fell apart, and Ferro Corp.'s $200 million eight-year deal, supplanted once the Cleveland-based industrial materials company priced a new five-year convertibles offering to fund a buyback of existing bonds - primaryside players are confronted with a virtually empty cupboard.

Although there are a number of deals out on the horizon, including a couple of potential multi-billion-dollar mega-deals for prospective issuers like BCE Inc., BIL Holdings, Clear Channel Communications Inc. and First Data Corp., none of those, or a slew of smaller possible issues, are being actively marketed at this time, according to primary sources.

However, junk market new-dealers may still see the odd pricing here or there - although most people in the market don't believe there will be many, or maybe not even any, opportunistically priced deals between now and Labor Day, given both the usual seasonal summer lull in the proceedings and the current worrisome state of the credit markets. One possible unusual source of new supply might be the conversion of bridge debt incurred in leveraged buyout deals, mostly from last year, into bonds. One such deal seen earlier in the week involved the issuance of $777 million new cash-pay and payment-in-kind bonds from Guitar Center Inc., which had been taken private last year by Bain Capital in a $2.1 billion buyout that paid investors $63 per share.

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