Sprint debt jumps post-numbers; Freescale debt structure weaker on downgrade; Goodyear gains ground

By Stephanie N. Rotondo

Portland, Ore., Feb. 19 - Sprint Nextel Corp. was the nom du jour Thursday following the release of the company's fourth-quarter results.

The quarterly numbers were not as bad as the market had been expecting, traders explained. As a result, the company's bonds climbed up as much as 4 points on the day.

Meanwhile, a rating downgrade weighed on Freescale Semiconductor Inc.'s debt structure. Traders reported that the term loan was about a point weaker, while the company's bonds were likewise lower.

Goodyear Tire & Rubber Co. put out its earnings release on Wednesday. Come Thursday, traders saw the tire maker's bonds anywhere from a point to 3 points better.

Overall, market players noted that the distressed bond arena was lighter, in line with the equities.

"Away from Sprint, the market felt soft most of the day," a trader said.

Sprint debt jumps post-numbers

Sprint Nextel's bonds got a boost following what one trader called "less worse-than-expected" numbers.

The trader quoted the 7 5/8% notes due 2011 at 84.5 bid, 85.5 offered, up from 82 bid, 83 offered. He also saw the 6% notes due 2016 at "68 and change" and the 8 3/8% notes due 2012 at 70 bid, 71.5 offered.

Another trader, calling the name "very, very active" deemed the 7 5/8% notes up 4 points at 85.5, with $50 million-plus trading. The 8 3/8% notes were seen up 3.5 points to 81 3/8, while the 6% notes ended 3 points better at 68.25. Sprint's 7 5/8% notes due 2015 edged up slightly to around 48 and the floating-rate notes due 2010 jumped 4 points to 86.5, down from the intraday high around 87.

Sprint Nextel, the third largest mobile phone carrier in the nation, posted a loss of $1.62 billion, or 57 cents per share. Excluding certain costs and expenses, the loss fell to just 1 cent per share, versus an expected loss of 4 cents per share. Sales revenue dropped 14% to $8.43 billion.

In 2008, Sprint lost 4.5 million customers, the company said. However, it is expected that defections will decline in 2009. The company also plans to complete its work force reductions in the current quarter.

However, Fitch Ratings cut Sprint's issuer default rating to BB from BB+, despite the better-than-expected report. The agency said that the downgrade reflected, in part, uncertainty regarding operating trends in 2009.

Sprint Nextel is an Overland Park, Kan.-based wireless network provider.

Freescale weaker following downgrade

Freescale Semiconductor's term loan softened during the trading session, with one trader pointing to the rating downgrade by Moody's as a possible stimulus behind the weakening.

The term loan was quoted at 46 bid, 47 offered, down from Wednesday's levels of 47 bid, 48 offered, the trader said.

The bonds reacted similarly to the term loan. One trader saw the 10 1/8% notes due 2016 trade down nearly a point to 14 1/8, with $8 million changing hands. The 8 7/8% notes due 2014 fell a point to around 20.

At another desk, the 8 7/8% notes were quoted at 20.5 bid, 22.5 offered, while the 10 1/8% notes were seen around 15.

Another source deemed the 8 7/8% notes a point weaker at 20.5 bid.

On Thursday, Moody's cut Freescale's probability-of-default rating to Ca from Caa1, reflecting the view that the company's recent debt exchange offer is a distressed exchange.

"While no payment default has occurred and there are no debt maturities until 2012, in Moody's opinion the successful closing of the transaction, which is designed to reduce debt and interest expense, would represent the occurrence of a deemed default," the rating agency said.

As was previously reported, under the proposed transaction, up to $1 billion of a first-lien incremental term loan will be exchanged for approximately $2.8 to $3 billion of senior and subordinated unsecured notes.

Moody's also said on Thursday that if the final outcome of the exchange is similar to the proposed terms, the rating on the Freescale's senior secured credit facilities would likely be revised downward.

This potential downgrade would reflect a higher expected loss driven by the reduced senior and junior unsecured positions in the capital structure as well as the expanded size of the senior secured creditor class to approximately $5.2 billion from $4.2 billion.

Moody's went on to say that upon closing of the exchange, the probability of default rating will probably revert back to Caa1.

Freescale is an Austin, Texas-based designer and manufacturer of embedded semiconductors for the transportation, networking and wireless markets.

Goodyear gains ground

Goodyear Tire's debt gained some during trading after its quarterly report came out on Wednesday.

A trader called the 8 5/8% notes due 2011 a point better at 83.5 and another market source saw the 7 7/8% notes due 2011 up nearly 3 points at 83.25 bid.

"I don't think they were horrendous; I don't think they were great," the first trader said of the numbers.

Tire maker Goodyear posted a net loss of $330 million, or $1.37 per share for the fourth quarter. That compares with a net income of $52 million, or 23 cents per share, the year before.

Akron, Ohio-based Goodyear attributed the weaker figures to lower sales and higher material costs.

Looking forward, the company plans to employ a variety of cost cutting measures, including reducing jobs and continuing a salary freeze. Goodyear also raised its four-year cost-cutting target to $2.5 billion from $2 billion.

"These actions address the new economic realities," Robert Keegan, chief executive, said in the statement.

Broad market mostly softer

Charter Communications Inc.'s 10¼% notes due 2010 fell almost 3 points to 81.75, according to a trader. The trader speculated that the debt was "just coming off its highs."

"It got blown up just like Sirius [XM Radio Inc.] the other day," he said, referring to both the recent news that Charter was planning to file for Chapter 11 by April 1 and a $530 million investment deal Sirius recently inked with Liberty Media Corp.

Sirius' 9 5/8% notes due 2013 ended either unchanged or a point weaker, depending on whom you asked, despite a rating upgrade from Moody's Investors Service.

One trader called the bonds flat at 45, while another pegged the notes a point lower, also at 45.

Moody's also said that it had plans to cut Liberty Media's rating. But the company's bonds jumped 3.75 points anyway, closing at 81.25 bid.

Freeport-McMoRan Copper & Gold Inc.'s 8 3/8% notes due 2017 slipped slightly to 87 bid, 87.5 offered.

A trader said GMAC LLC's paper was "up a point across the board, but I don't know why."

"You need to read a book a day to know what's going on with GMAC," he quipped.

The trader saw the 6 7/8% notes due 2012 "straddling 60."

The trader also saw Novelis Inc.'s 7¼% notes due 2015 falling to around 30 from around 52 a week ago.

Sara Rosenberg contributed to this article.

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