CIT heads for higher ground; Freescale trades actively on numbers; Seitel shakes off downgrade

By Stephanie N. Rotondo

Portland, Ore., July 24 - Rounding out the week, CIT Group Inc. remained among the most active names, though it had lost its market dominance.

But the bonds were seen moving higher as seemingly positive news came to light. Asset sales and sweetened tender offers were the big news of the day.

Meanwhile, Freescale Semiconductor Inc. was one the more active debts trading. The company put out its quarterly results late Thursday and though it saw good volume, the bonds ended largely unscathed.

A rating downgrade did little to provoke interest in Seitel Inc.'s notes. Earlier this month, the debt had dipped a good bit before making a recovery. The drop was blamed on a covenant breach - which not coincidentally was partly the reason for the downgrade.

CIT heads for higher ground

After spending a good portion of the week heading lower, CIT Group recouped some of its losses as the week came to an end.

One trader called the bank's debt "up 2 to 3 points, across the board," placing the floating-rate notes coming due in August at 80 bid, 82 offered, up from 79 bid, 80 offered. He also saw the 5 1/8% notes due 2014 ending at 55 bid, 56 offered, compared with 52 bid, 53 offered on Thursday.

However, another trader called the 2009 floaters unchanged at 80 bid, 81 offered. The other short 2009 issues did end up trading up, he noted, seeing paper in the mid-60s. He gave a range of mid-50s for "long-dated paper."

The 101-year-old financial institution suffered for most of the week as bad news continued to stream out about the struggling lender. But Friday brought some news that investors seemed to react favorably to.

First up was news that the company had sweetened its tender offer for the $1 billion in notes coming due this year. For investors who tendered by the early deadline - July 31 - an additional $50 bonus would be tacked on, bringing the total consideration to $825 per $1,000 principal amount tendered.

Second was word that the company was reconsidering its stance on keeping the company whole, as the market learned that CIT had previously rebuffed advances from Warren Buffett.

Now, however, CIT is considering selling off its railcar- and aircraft-leasing units. The railcar unit is the nation's third largest with a fleet of more than 116,000 cars. The aircraft division meanwhile is also third in its sector, with around 300 aircraft.

"The Wall Street Journal reported this morning that CIT is considering selling off some of its best assets, including its aircraft and rail car leasing units," wrote Kathleen Shanley, an analyst with Gimme Credit LLC, in an afternoon comment. "It is not clear how much cash CIT will be able to raise, or how quickly. ILFC has been trying to sell itself for months; financing has been difficult to arrange, and the rumored bids are at least several billion short of ILFC's book value."

However, Shanley continues, after previously rejecting its suitors, CIT will likely struggle to find buyers.

"We are in different times, and it seems unlikely the CIT story will be resolved so happily," she writes. "It is unfortunate that CIT spurned opportunities that could have salvaged some value before the situation deteriorated so dramatically."

Freescale trades actively post-numbers

Freescale Semiconductor's debt managed to garner a spot on the day's active list, traders reported, after the company released its earnings late Thursday.

One trader deemed the bonds unchanged, however. He quoted the 8 7/8% notes due 2014 at 58 bid, 60 offered on "lots of trades."

Another trader called the name "somewhat active," its 8 7/8% notes "kind of where they have been" around 59 and its 10 1/8% notes due 2016 "in the low-40s."

"There was activity, but it doesn't look like there was really any movement," he said.

On Thursday, the Austin, Texas-based chipmaker reported net sales of $824 million for the second quarter ending July 3. That compared with sales of $840 million the year before and was attributed to the sell of its cellular handset units in 2008.

Loss from operations came to $345 million and included reorganization costs of $82 million. The company posted a loss of $351 million in the first quarter of 2009 and a loss of $137 million in the second quarter of 2008.

As of July 3, Freescale had cash and equivalents of $1.31 billion.

"We continue to make solid progress in the transformation of Freescale," said Rich Beyer, chairman and chief executive officer, in a press release. "Our second-quarter results demonstrate that we are reducing costs, improving profitability and positioning the company for long-term growth."

Among other technology names, a trader saw Nortel Networks Corp.'s 10¾% notes due 2016 trading around 38 or 39 Friday, which he called "probably a point or so" higher on the day - and well up from the 33 to 34 level the bonds held at the beginning of the week. The rise coincided with Friday's court-ordered auction of the bankrupt Canadian telecom equipment maker's wireless division, the results of which were not yet in by late in the session.

Seitel shakes off downgrade

Seismic data collector Seitel saw its bonds remain steady during Thursday, despite a downgrade from Moody's Investors Service.

A market source called the 9¾% notes due 2014 unchanged at 58 bid, 59 offered. Before closing at that level Thursday, the bonds had been at 57 bid, 58 offered on Wednesday.

Moody's cut Setitel to Caa3 from B3, citing pressure on the company's liquidity and earnings. The rating agency also noted a covenant violation on the company's bank facility, due to a decline in operating results.

"Our negative outlook considers continued weakness in Seitel's business prospects into 2010," the agency said in its statement. "Recognizing Seitel's yearly business cycle which underscores a heavy reliance on fourth quarter sales for cash flow and earnings, Moody's anticipates Seitel's February 2010 interest payment is highly questionable given the very weak demand for this sector."

Paul Deckelman contributed to this article.

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