Freeport trades heavy on weak numbers; Capmark active, higher; GM bonds varied, loans stronger

By Stephanie N. Rotondo

Portland, Ore., April 22 - Freeport-McMoRan Copper & Gold Inc.'s bonds traded actively Wednesday, but this time, market players had a reason.

The name is typically one of the more active issuers, but usually there is no news to spur the activity. However, the mining company released its first-quarter results on Wednesday - and the numbers were not great.

Meanwhile, Capmark Financial Group Inc. remained topical as an auction to settle the company's credit default swaps took place. The resulting price was 23.375 and the bonds moved up to hit that mark.

General Motors Corp.'s bonds were "all over the place," though its bank debt ended higher, traders reported. The moves came as the company said it might skip an upcoming interest payment in order to focus on a possible debt-for-equity swap.

Freeport trades heavy on weak numbers

Some $50-plus million of Freeport-McMoRan debt traded during the midweek session, according to one trader familiar with the name, after the release of the company's first-quarter results.

The trader deemed the 8 3/8% notes due 2017 up half a point at 95.5, adding that the name was "leading the charge" in a "very active Wednesday."

Another trader also saw the issue in the 95 context, but called it "down a smidge."

The copper and gold mining company reported net income of $43 million, or 11 cents per share, for the quarter. That compared with income of $1.1 billion in 2008.

Revenue dropped 54% to $2.60 billion from $5.67 billion. Market players had been expecting income of 13 cents per share on revenue of $2.69 billion.

The Phoenix, Ariz.-based company has cut jobs and production in its efforts to keep its bottom line in the black. However, a decline in demand for its commodities, as well the prices of said products, has put pressure on the balance sheet.

Still, Richard Adkerson, Freeport's chief executive officer, said during a conference call that the company remained focused on curbing costs.

"In this environment, we are going to continue to focus on protecting our liquidity because the one thing we want is for our company to continue to own these assets that we own today, because we believe those assets are going to be worth significant value in the future," Adkerson said.

"We've idled equipment; we're mining higher grades; we're doing what we need to do to make that operation and other operations cash-flow positive," he continued.

Capmark active, higher

Capmark Financial Group's debt traded rather heavily, as its credit default swap auction settled at 23.375.

A trader said about $30 million of the 6.3% notes due 2017 changed hands and gained a point to around 23 1/8. Another trader quoted the issue at 23 bid, 24 offered "kind of ZIP code."

The swaps were triggered back in March when the Horsham, Pa.-based company failed to make a payment on its bridge loan. On Tuesday, the company said it had received a second extension on 94% of said loan, giving it until May 8 to correct the default.

GM bonds varied, loans better

General Motors' debt structure ended the day mixed as the company said it might skip a $1 billion bond payment on June 1.

In the bonds, a trader said the debt was "all over the place." He saw the benchmark 8 3/8% notes due 2033 "pretty much flat" around 9, while the 8.1% notes due 2024 were likewise unchanged at 7.5. But the 6¾% notes due 2028 fell nearly a point to 6.5 and the 7.2% notes due 2011 inched up half a point to 9.75.

The Detroit-based automotive company's term loan was quoted by one trader at 55½ bid, 57 offered, up from 54 bid, 55 offered on Tuesday, and by a second trader at 56½ bid, 57½ offered, up from 54 bid, 56 offered.

And, the first trader quoted the revolver at 44 bid, 46 offered, up from previous levels of 43 bid, 45 offered.

GM said that it might skip the coupon payment on June 1 - also the deadline by which the company must either come up with a new, improved restructuring plan or file for Chapter 11 protections - so that it could focus on a proposed debt-for-equity swap. Since last week, there has been chatter that the company is considering offering to exchange $27.5 billion of bond debt for equity by the end of the month.

There has also been a lot of speculation that General Motors may file for Chapter 11 even with Tuesday's reports that it will be getting up to $5 billion more from the government to get it through the month of May.

The troubled company already borrowed $13.4 billion from the U.S. Department of Treasury under an agreement that was reached on Dec. 31.

But not everyone believes that bondholders would favorably receive a debt swap.

In a research report released Tuesday, Kip Penniman of KDP Investment Advisors said that bondholders would not be enticed by an exchange.

"We expect the ownership stake offered to bondholders would be unattractive - maybe in the 20% range," Penniman wrote.

However, Penniman did seem to support a prepackaged bankruptcy filing.

"We believe GM could achieve a greater than two-thirds reduction in its unsecured debt in a prepackaged filing while negotiating significant concessions with the United Auto Workers," Penniman said.

Bondholders of the automaker were reportedly contacted earlier this week to discuss the potential swap - the first time since the group met with GM and lawmakers in early March to talk about any form of restructuring.

Broad market mixed

Elsewhere in the wide world of distressed debt, TXU Corp.'s 10 7/8% notes due 2017 fell slightly to 61 5/8, a trader said.

The trader also saw the 8.55% notes due 2010 linked to Abitibi Consolidated Inc. at 5, which he called up half a point.

"Big mover," he quipped.

Another trader quoted the issue at 4.5 bid, 5 offered.

There was "not much" going on in MGM Mirage's bonds, a trader said. Another saw the 8 3/8% notes due 2011 at 22.5 and the 6¾% notes due 2012 at 46.5. That was 1.5 points weaker and unchanged, respectively.

Sara Rosenberg contributed to this article.

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