Rite Aid bonds inch higher; Ford, GM debt gains despite poor sales numbers; Tech sector rallies some

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., Jan. 5 - The distressed bond market had a generally better tone to it Monday, the first "real" trading day of the New Year.

"The market was mostly bid for," a trader said. "Some stuff was up a lot."

"Everything is rallying," another trader said. "There are definitely some people putting money to work."

December sales numbers began coming out during the session. Rite Aid Corp. reported a 2.1% decrease in sales, but the news did not weigh on the company's debt. In fact, market players saw the bonds moving higher, albeit slightly.

Car sales figures also started to come out. Both Ford Motor Co. and General Motors Corp. posted dismal numbers for the month. However, investors seemed to shrug off the bad news, instead giving both automakers' debt a boost.

Meanwhile, the tech sector gained some ground - at least in the bond market. Losses in the equities were blamed in part on the same sector, but companies like Alltel Corp. and First Data Corp. saw their bonds advance at least 3 points by the end of business.

Overall, market players seemed positive about the market's start. Traders said they were relatively busy on pretty decent volumes. But even as the general market was seen better, several sources said there was "nothing that really stood out," and others noted that activity in the distressed arena remained uneven.

Rite Aid inches higher

Despite a decline in December sales, Rite Aid's debt edged up slightly, though traders noted that volume was on the thin side.

A trader pegged the 8 5/8% notes due 2015 at 37 bid, 38 offered and the 9 3/8% notes due 2015 and the 9½% notes due 2017 at 37.5 bid, 38.5 offered.

"That was a little bit better than it was," the trader said.

Another trader saw the 9½% notes at 36 bid, 37 offered.

The Camp Hill, Pa.-based drugstore chain said Monday that December sales fell 2.1%, attributed to a decline in nonprescription sales and continuing struggles at its Brooks Eckerd stores.

Total sales fell to $2.16 billion from $2.2 billion in 2007. Still, Rite Aid noted that its sales for the first 43 weeks of its fiscal year were up 10% to $21.66 billion from $19.71 billion.

Meanwhile, a trader said retailers in general were gaining some ground. He saw Neiman Marcus Group Inc.'s 9% notes and 10 3/8% notes due 2015 advancing to around 68, while Levi Strauss & Co.'s 9¾% notes due 2015 closed around 80, up from the mid-70s.

Ford, GM debt gains

Ford Motor and General Motors both saw their term loans strengthen during Monday's trading session as the debt shrugged off bad monthly sales results and followed the rest of the market higher, according to traders.

Ford was quoted by one trader at 44 bid, 46 offered, up from 41 bid, 45 offered, and by a second trader at 43 bid, 45 offered, up on the bid side from 41 bid, 45 offered. Both traders quoted GM's loan at 51 bid, 53 offered, up from 47 bid, 51 offered.

"December sales were terrible but completely expected. I think it was priced in. Up because everything is up today," one trader added.

In the bonds, a trader saw Ford's paper "trading a bunch," its 8% notes due 2016 moving up to 68. Another source called GM's 7 1/8% notes due 2013 more than 6 points better at 25.5 bid, 30 offered.

On Monday, Ford said that its total sales for the month of December were 139,067, down 32.4% from 205, 685 in December 2007.

Total Ford truck sales for December were 91,027, down 33.9% from 137,764 last year.

And, total Ford, Lincoln and Mercury care sales for the month were 43,087, down 26.4% from 58,580 in the 2007 comparable period.

"This is a strong ending to end a very challenging year," Jim Farley, Ford's group vice president, Marketing and Communications, said in a news release. "In addition to finishing the year with increased market share, we received several accolades from third parties concerning our world-class quality and safety, and we turned some heads on the fuel economy front with our 41 mpg Fusion Hybrid, the most fuel-efficient mid-size sedan in America."

Also on Monday, General Motors announced its December sales results that included total sales of 221,983, down 31.4% from 323,453 a year ago.

Total GM truck sales for the month were 134,477, down 35% from 206,870 in December 2007.

And, total December car sales were 87,506, down 24.9% from 116,583 in the same period last year.

"Given the ongoing challenges and the difficult market environment, we were very encouraged to see a volume rebound for GM in December compared with both October and November," Mark LaNeve, vice president, GM North America Vehicle Sales, Service and Marketing, said in a news release.

"We are building more vehicles than ever that provide great value and Americans enjoy owning. That is why, for the year, we are seeing our market share holding steady at just above 22%. That's 5 percentage points more and 760,000 vehicles more than our nearest competitor," LaNeve added in the release.

Ford is a Dearborn, Mich.-based automotive company. General Motors is a Detroit-based automaker.

Tech sector turns upward

The tech sector "looked like it was rallying a bit," a trader said of Monday's trading session.

For example, Alltel's paper got the boost traders had been looking for Friday when Verizon said its planned buyout of the wireless network provider would close later this week. The trader saw the 7% notes due 2012 at 100.75 - a level echoed by another market source - and the 7 7/8% notes due 2032 at par, up from 95 bid, 96 on Friday.

Still, the trader noted that there was not a lot of volume, adding that Alltel had yet to be upgraded.

"I think a lot of the high-grade guys are waiting for that," he said. "Either that or for the transaction to go through."

Verizon said in a regulatory filing on Friday that its $5.9 million purchase of Alltel would close Jan. 9. The merger of the two companies will surpass AT&T as the largest carrier in the country.

Elsewhere in the sector, First Data's 9 7/8% notes due 2015 gained 3 to 4 points to close at 66 bid, 67 offered. A trader said that was better than levels in the high-50s to low-60s last week.

Amkor Technology's 7¾% notes due 2013 ended about 3 points better at 63 bid.

Broad market tidbits

Harrah's Entertainment Inc.'s 10¾% notes due 2018 finished the day "in a lot," a trader said, at 14.75 bid, 15 offered. The trader also saw the 5 5/8% notes due 2015 at 16.5 bid, 17.5 offered. When asked why the bonds had fallen, the trader remarked, "They make no money and have lots of debt...a bad combination."

Washington Mutual Inc.'s senior holding company paper "continues to rally," another trader said. The senior issues, such as the 4% notes coming due next week, moved up to 71.5 bid, 72 offered, while the subordinated issues, such as the 4 5/8% notes due 2014, inched up to around 30.

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