GM, Ford decline on sales report; Hertz bonds fall on downgrade; Idearc mostly steady; Station firm

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., April 1 - General Motors Corp. and Ford Motor Co. saw their debt structures declining Wednesday, as new sales figures for March were released.

The day marked the third straight day of losses for GM, whose chief executive officer was forced out earlier in the week. His replacement has been charged with creating a new viability plan, which he has said is "more probable" to include a court restructuring.

Elsewhere, Hertz Global Holdings Inc.'s bonds slipped some after Standard & Poor's downgraded the car rental company. Hertz was also named the winner in a bankruptcy auction of some of Advantage Rent-A-Car assets.

Idearc Inc., which filed for Chapter 11 protections on Tuesday, continued to see its debt trading somewhat actively. Traders saw the bank debt holding in there, while the bonds were slightly more depressed.

Despite a wider fourth-quarter loss, Station Casinos Inc.'s bonds gained about 4 points on the day. Traders had no explanation for the move.

GM, Ford decline on sales

General Motors' debt structure continued to weaken during the mid-week session, as dismal automotive sales numbers for March came out.

A trader said GM's benchmark 8 3/8% notes due 2033 were one of the most active issues of the day, with about $25 million changing hands. He pegged the debt at 11.25, a decline of 1.75 points.

At another desk, GM's 7 1/8% notes due 2013 were quoted at 11.5 bid, 12 offered, a loss of about 4 to 5 points on the day. The benchmark issued was seen at 11 bid, 12 offered, down just a point.

GM's term loan also softened Wednesday as its March numbers were even worse than rival Ford's, at least percentage wise, with total sales down 44.7% to 156,380 from 282,732 last year, according to a trader.

Late in the session, the Detroit-based automaker's term loan was quoted at 39½ bid, 40½ offered, down from 41½ bid, 42½ offered, the trader said.

GM's car sales for the month were 68,877, down 41.3% from 117,378 in March 2008. Total truck sales for March were 87,503, down 47.1% from 165,354 in the previous year.

"Sales for GM and the industry showed signs of life at the end of the month compared with January and February," said Mark LaNeve, vice president, GM North America Vehicle Sales, Service and Marketing, in a news release.

"We are encouraged by actions taken by the Federal government to stabilize the industry and stimulate demand," LaNeve added.

Also in the news, reports surfaced citing "a source familiar with the plans" that indicated GM was considering breaking the company into pieces should it file for Chapter 11 protections. The source said that under the possible plan, the company's most profitable units would break off to "quickly" form a new company, while the lesser profitable businesses would remain under bankruptcy protection for a longer term.

Elsewhere in the sector, Ford Motor's term loan gave up some ground during the trading session as the company reported total sales for the month of March of 131,465, down 40.9% from 222,337 in March 2008, according to a trader.

By late day, Ford's term loan was being quoted at 46¾ bid, 47¾ offered, down from 47¾ bid, 48¾ offered, the trader said.

In the bonds, a source placed the 7% notes due 2013 at 65 bid, 66.5 offered, a loss of about 2 points. The 7.45% notes due 2031 dropped a point to 30 bid.

Car sales for March were 46,467, down 36.6% from 73,296 last year. Total truck sales for the month were 78,640, down 43.7% from 139,778 in the 2008 comparable period.

Ford is a Dearborn, Mich.-based automotive company.

Hertz falls on downgrade

In other somewhat automotive-related names, Hertz bonds were seen falling 1.5 points following a downgrade from S&P late Tuesday.

A trader placed the 8 7/8% notes due 2014 at 59.5, noting that about $20 million traded. Another trader pegged the issue around 60.

S&P dropped its long-term corporate credit rating to B from BB-. Also, the unsecured notes were lowered to CCC+ from B+. The recovery rating was revised to 6 from 5, indicating negligible recovery in the event of a default.

The rating change was due to the company's financial performance, which has been deteriorating in the last few months. S&P said it expected the downturn to continue though late 2009.

"We expect the company's earnings and cash flow to remain under pressure in 2009 as a result of reduced demand and the effect of a weak (albeit recently somewhat improved) used car market, which will likely result in continued higher-than-expected depreciation expense," said S&P credit analyst Betsy Snyder in a press release. "In addition, we are concerned about the company's ability to refinance a significant portion of its $6 billion of debt that matures through 2010. If it appears that the company will be unsuccessful, we would likely lower the ratings further."

Also on Tuesday, Hertz won a bankruptcy auction for assets of bankrupt Advantage Rent-A-Car. The Park Ridge, N.J.-based company paid $30.3 million for leases, airport concession agreements and trademarks previously owned by Advantage.

Idearc mostly steady

Idearc's term loan B held firm on Wednesday at 37¾ bid, 38¼ offered, which is where it closed out Tuesday after rallying from 31¾ bid, 32¾ offered on bankruptcy news, according to a trader.

But the bonds slipped slightly during Wednesday's session, with a trader quoting the 8% notes due 2016 at 2 bid, 2.5 offered.

On Tuesday, Idearc announced that it has reached an agreement in principle with the agent bank and a steering group of its secured lenders on certain critical elements of a plan of reorganization, and that a Chapter 11 filing was made.

Under the agreement in principle, the company's total debt will be reduced to a pro forma level of $3 billion of secured bank debt, with a 12% interest rate and a six-year term, from approximately $9 billion currently.

Mandatory amortization will be $60 million for each of the first two years following confirmation and $40 million per year thereafter, and, the company will retain 32.5% of surplus cash flow, with the balance to be paid as additional amortization on the bank debt.

Idearc also agreed with the agent bank and steering committee to continue to fund operations from all but $250 million of the company's more than $600 million cash collateral balance, and the remaining $250 million of cash collateral will be paid to the secured lenders as adequate protection, subject to bankruptcy court approval.

Other terms of Idearc's proposed plan of reorganization are still to be negotiated, but it is anticipated that the remainder of its bank debt and bonds will be converted to equity.

As part of the plan, the company will not obtain debtor-in-possession financing during the reorganization, since it maintains substantial cash balances and continues to generate positive cash flow, and has reached an agreement on use of cash collateral.

The company expects to be able to file a plan of reorganization in approximately 30 days.

Idearc is a Dallas-based provider of yellow and white page directories and related advertising products.

Station gains despite quarter's loss

Station Casinos' bonds gained as much as 4.5 points on the day, despite a wider quarterly loss.

A trader placed the 7¾% notes due 2016 at 36.25 and the 6% notes due 2012 at 33.5, a gain of 4 and 4.5 points, respectively.

Another source called the 6% notes 3 points better, also at 33.5 bid, while another deemed the 7¾% notes 3 points firmer at 36.

For the quarter, Station posted a loss of $3.19 billion, versus a loss of $437.4 million the year before. The casino operator said the results included $3.39 billion in writedowns and other charges.

Total revenue slipped 19% to $289.7 million from $357.5 million the previous year. Casino revenue dropped to $206.4 million from $255.6 million, while food and beverage sales declined to $52.1 million from $63.8 million.

Also, the company decided to skip its interest payment on its 6% notes.

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