Ford notes weaker as debt comes due; Charter bonds unaffected by tender; VeraSun firms on buyout buzz

By Stephanie N. Rotondo

Portland, Ore., Sept. 30 - With some market players away for Rosh Hashanah and month- and quarter-end pricing keeping those in their desk busy, traders called Tuesday's session difficult.

"It was a difficult day to get things done," a trader said. "There were light volumes outside of finance names."

Still, traders reported that "bottom feeders" were coming in, scooping up things at lower prices, while other were "selling into strength."

"There was a good solid reversal from [Monday]," another trader said. As some investors have been "forced to raise cash...the buyers are not hedge fund types, but more traditional investors that have been sitting on cash waiting for opportunities to come."

Of the goings-on of the day, Ford Motor Co.'s bonds were called unchanged to slightly weaker on expectations that the company would use cash on hand to repay debt coming due Wednesday. Meanwhile, General Motors Corp.'s notes were also deemed unchanged to a bit softer on no news.

Charter Communications Inc. announced that it began a tender offer for five series of notes Tuesday. But traders saw little response in the company's bonds, which ended the day unchanged to a touch lower.

Market buzz regarding a potential buyout gave VeraSun Energy's debt a boost during the session. The ethanol producer's bonds gained anywhere from 2 to 7 points on the day.

Ford paper a tad lower

Ford paper finished the day unchanged to just slightly off as the company was expected to likely use cash on hand to repay debt coming due Wednesday.

A trader said the 7.45% notes due 2031 were unchanged at 44 bid, 46 offered. But another source called the 5.7% notes due 2010 were down a point around 77.

At another desk, a market source deemed the 7% notes due 2013 down nearly 3 points at 62.75 bid. Yet another source called the 7.45% notes 1.5 points weaker at 43 bid, 45 offered.

According to a Bloomberg report, analysts said they expected Ford would use available cash to repay the 5 5/8% and 7¼% notes due Wednesday instead of drawing down its revolving credit facility. The total debt maturing equals just over $1 billion. In the article, one analyst said that the repayment was more likely than a refinancing given the current market conditions.

However, Ford also has several other issues maturing in October. According to Nasd Trace, about eight issues come due on Oct. 20. That does not count the other paper maturing through the end of 2008.

As of June 30, Ford had $30.1 billion in cash and equivalents, as well as $12.5 billion in marketable securities.

Meanwhile, sector rival General Motors' also saw its debt unchanged to slightly lower.

One trader called the benchmark 8 3/8% notes due 2033 at 39 bid, 40, down a deuce. Another quoted the bonds around 40, down from 42 bid, 44 offered previously.

Another trader saw GM's benchmark issue fall a point to 40 bid, 42 offered, while its GMAC LLC 8% notes due 2031 slipped a half, also to the 40 bid, 42 offered level.

Charter little changed

Charter Communications announced during the session that it will buy back $100 million in outstanding debt, but the news had little effect on the company's bonds.

One market source said there was "not much trading" in the name, pegging the 11% notes due 2015 at 65 bid, 68 offered, compared with 67 bid, 69 offered last week.

Another source placed the 10¼% notes due 2010 around 90, slightly softer from its previous levels around 89.

Yet another source said the bonds were not heavily traded, calling the 10% notes due 2014 a point weaker at 35 bid, 37 offered.

St. Louis-based Charter said in a press release that its subsidiary, Charter Communications Holding Co., LLC, has begun a tender for five series of notes. The tender includes the 10¾% senior notes due 2009, the 10¼% senior notes due 2010, the 11¾% senior discount notes due 2010, the 10% senior notes due 2009 and the 9 5/8% senior notes due 2009. The company plans to pay up to $100 million, including interest, to exchange the debt.

For each $1,000 principal amount, Charter HoldCo is offering $975 for the 10¾% notes; $970 for the 10¼% notes, 11¾% discount notes and 9 5/8% notes; and $980 for the 10% notes. Holders will also receive accrued interest. The payouts also include a $15 early tender premium for those bonds received by 5 p.m. ET on Oct. 14. The offer is set to expire on Oct. 29.

VeraSun up on buyout talk

Rumors of a potential acquisition helped VeraSun's bonds gain anywhere from 2 to 7 points on the day.

A trader said the 9 7/8% notes due 2012 closed at 70 bid, 74 offered, up 7 points, while the 9 3/8% notes due 2017 finished at 39 bid, 41 offered, up 2 points.

But another called the 9 3/8% notes "about the same" at 39 bid, versus 37 bid, 38 offered last week. He saw the 9 7/8% notes 5 points firmer at 75 bid, 79 offered, compared with 70 bid, 73 offered last week.

The buyout speculation came after the company said several interested parties had expressed a "strategic interest" in the ethanol producer. The chatter was also preceded by the Sioux Falls, S.D.-based company's expectations that its quarterly loss would fall between $63 million to $103 million, as well as an attempt to raise $20 million though a public offering.

Among other energy producers, Reliant Energy Inc.'s 7 7/8% notes due 2017 "did not come back at all," a trader said, after losing 10 points in the previous session. The trader quoted the bonds at 73 bid, 75 offered.

Broad market mostly lower

Financials remained active, traders reported. Washington Mutual Inc.'s debt, for one, got a boost on the back of an 8-K filing with the Securities and Exchange Commission that stated the company had more cash than was previously thought.

One trader said the holding company paper, such as the 4.2% notes due 2010, jumped 15 points to the mid-60s from the 50s up on the news, before settling back to close just below 60 in active trading.

Another trader quoted the paper at 60 bid, 65 offered, up 15 points.

Meanwhile, Lehman Brothers' senior paper, like the 6 7/8% notes due 2018, slipped a point to 11 bid, 14 offered.

In the rest of the distressed market, Idearc Inc.'s 8% notes due 2016 continued to fall, ending around 28.25. A trader called sector peer R.H. Donnelley Corp. down "2 to 3 points across the board," its Dex Media West LLC's 8½% notes due 2010 at 87.25.

After losing more than 6 points in the previous session, Spectrum Brands Inc.'s 7 3/8% notes due 2015 pared its losses, gaining 3 points to close at 45 bid.

Pilgrim's Pride Corp.'s 8 3/8% notes due 2017 were quoted at 42 bid, 44 offered, half a point softer.

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