Nova Chemicals' bonds dive on liquidity fears; United Rentals steady to weaker; GM paper ends softer

By Stephanie N. Rotondo

Portland, Ore., Jan. 21 - The distressed bond market was unable to move higher in line with the equities Wednesday, but traders called the market mostly unchanged.

"The market was flat to marginally down," a trader said. "It certainly didn't rally with the [stock market] rally."

Nova Chemicals Corp., however, ended the day much more than "marginally down." An upcoming maturity and concerns about liquidity sent one issue of the company's debt down by 20 points, while other issues saw only single-digit declines.

Elsewhere, United Rentals Inc.'s bonds finished the day unchanged to modestly weaker. Still, traders said activity was light, despite recent news that the company had cut its 2008 guidance.

General Motors Corp. lost its top spot in the automotive sector, as new sales reports showed Toyota beating the Detroit carmaker in 2008 sales. According to market players, the company's bonds dipped slightly by the end of the day.

Nova dives on liquidity fears

Fears regarding an impending maturity sent Nova Chemicals' 7.4% notes coming due in April down 20 points on the day, traders reported.

One trader saw the bonds fall to around 62, calling the action "ugly." Another said there was "a bunch of activity" in the issue, which he saw ending at 62 bid, 63 offered, down from opening levels near 70 and Tuesday closing levels in the low-80s.

"That's way down. Wow," he remarked.

The trader also quoted the 6½% notes due 2012 at 33 bid, 34 offered, down from the high-30s previously.

Yet another source deemed the 6½% notes more than 3 points weaker at 34.75 bid.

The company's stock was also seen taking a massive hit as a report questioning the company's liquidity hit the market. Canadian newspaper Globe and Mail said Wednesday that Nova has C$1.1 billion of debt maturing in the next two years and that the company has thus gone to its bankers in an effort to amend terms of the debt.

In response, Nova issued a press release late in the day - too late, however, to recover any losses on the day - stating that it had $575 million available liquidity as of Dec. 31. The company also said it has full access to its credit facilities.

"Although we would find purchase of our $250 million bonds due April 1, 2009 attractive at current prices, consistent with our insider trading policy we do not intend to consider purchasing any bonds until next week's release of our fourth quarter 2008 results," the company said in the statement. The results will be released on Jan. 29.

Nova is a Calgary-based manufacturer of plastics and chemicals.

United Rentals ends weaker

United Rentals' bonds were on the quiet side, despite the company cutting its guidance in the previous session.

One trader noted that trading in the bonds was thin, though "a lot of the stock traded." He saw the 6½% notes due 2012 at 83.25 bid, 84 1/8 offered, which he called unchanged. He added that the trades were "scrappy in size."

At another desk, a trader pegged the bonds around 83.25, down "a point or so" from levels around 84.5 on Tuesday. Another source placed the 7% notes due 2014 at 68 bid, a point weaker.

The Greenwich, Conn.-based equipment rental company announced late Monday that it lowered its 2008 guidance due to weakness in the construction sector, as well as the overall economic downturn. United Rentals also said that it will face a large impairment charge in the fourth quarter.

Under the new forecast, the company expects to see sales of $3.27 billion, down from previous forecasts between $3.3 billion and $3.4 billion. Analysts had been expecting revenue of $3.28 billion.

Earnings will also be affected, the company added. A $1.1 billion goodwill impairment charge will also show up on fourth-quarter results.

"Our revised full year guidance reflects external factors such as the current construction cycle and the macro-economy, as well as our decision to accelerate branch closures into the fourth quarter of 2008," Michael Kneeland, chief executive, said in a statement.

As a result of the news, Moody's Investors Service downgraded the company on Wednesday.

GM slips, loses top spot

General Motors' debt ended the session softer, as the carmaker fell below rival Toyota as the largest automaker in the world.

A trader said the benchmark 8 3/8% notes due 2033 slipped to 15 during trading.

"That's down a little bit, but it's meaningless," he said. "Once things are trading at 15, I'm not sure it really matters."

Another trader also saw the issue dip slightly to 15.25 bid, 17.25 offered.

GM said on Wednesday that it sold 8.35 million vehicles in 2008, versus Toyota's sales of 8.97 million. All told, GM's sales fell 11%, while Toyota dropped 4%.

But the new data pushed Toyota to the head of the automotive sector, the first time since 1931.

In the rest of the autosphere, Ford Motor Co.'s 7.45% notes due 2031 were deemed unchanged at 24.5 bid, 26.5 offered. Another source saw the 7.45% notes around 25, calling that "right where it has been," and the 9 7/8% notes due 2011 at 75.5, half a point better to unchanged.

Broad market mostly flat

Masonite International Inc.'s term loan was a little stronger on Wednesday, with the improvement attributed to market technicals, according to a trader.

"Some guys have done the work and are starting to create a position," the trader remarked.

The term loan was quoted at 37 bid, 39 offered, up from Tuesday's levels of 35 bid, 38 offered, the trader added.

Meanwhile, Freeport-McMoRan Copper & Gold Inc.'s 8 3/8% notes due 2017 traded in decent size - one trader said $40 million of the bonds traded - though the debt was largely unchanged. The trader saw the issue around 78.25, while another trader placed the bonds around 78.

Nortel Networks Corp.'s floating-rate notes due 2014 closed unchanged at 18 bid, 19 offered.

Sara Rosenberg contributed to this article.

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