Hawker gains despite poor numbers; General Growth gets boost; GMAC, ResCap notes mostly better

By Stephanie N. Rotondo

Portland, Ore., Aug. 5 - The distressed debt market continued to head higher during Wednesday trading, though traders were still complaining about a lack of supply.

"There is a picked over feeling," a trader said. "There are too many dollars trading too few securities."

Of the day's notables, Hawker Beechcraft Acquisition Co. LLC saw its bonds jump 5 to 6 points on the day. The move came despite the company's dismal quarterly report.

General Growth Properties Inc. also had numbers out. Despite that weak showing, the bonds also moved higher by at least 3 points.

News reports published Wednesday cited analyst comments regarding GMAC LLC and its struggling offshoot, Residential Capital LLC. The comments indicated that throwing ResCap to the wolves might be in the best interest of the parent. Still, both companies shook off such things and ended the day largely better.

Hawker better despite numbers

Hawker Beechcraft bonds were quoted higher during the midweek session despite the company's disappointing earnings release.

A trader said the 8½% notes due 2015 were 65.5 bid, 67.5 offered, up from 60 bid, 62 offered. He also saw the 8 7/8% notes due 2015 at 52 bid, which "also looks higher," he said.

"Somebody likes them," he added.

Another source pegged the 8½% notes at 66 bid, 67 offered, up 5 to 6 points and another deemed the notes 66.5 bid, up about 6 points.

The Wichita, Kan.-based company reported net sales of $816.3 million for the quarter ending June 28. That was a more than $200 million decline year over year. The company said the "deterioration in the global economy significantly impacted aircraft deliveries," with only 78 aircraft delivered in the time period.

Operating income fell to $39.4 million from $86.4 million in the second quarter of 2008. However, Hawker managed to post after-tax net income of $172.2 million, compared with $24.9 million previously. The gain was the result of a $175 million repurchase of $274.5 million principal amount of debt.

General Growth bonds gain

In other earnings news, General Growth Properties reported a decline in quarterly net operating income from its retail properties. But the bonds managed to gain ground anyway.

A trader pegged the 7.2% notes due 2012 at 79.5 bid, 80 offered, which he called up 4 points. Another market player generically placed the company's various issues at 79 bid, 81 offered, a 3- to 4-point gain.

The Chicago-based mall operator saw its second-quarter net operating income from its retail segment dip 2.1% to $615.8 million from $629.1 million in 2008. Funds from operations dropped 74% to $58.2 million, or 18 cents per share. Core FFO declined 44% to $124.6 million, from 39 cents per share.

The company filed for bankruptcy protections in April.

American Axle up despite loss

A trader saw American Axle & Manufacturing Holdings Inc.'s 7 7/8% notes due 2017 "maybe up a couple of points," despite the bigger-than-expected quarterly loss the parts maker reported.

He saw those bonds up 2 points on the day at 42 bid, 44 offered.

American Axle - heavily dependent upon General Motors Corp., its main customer - posted a narrower second-quarter net loss from a year ago, $288 .6 million, or $5.20 per share in the latest period, versus the year-earlier $644.3 million of red ink, or $11.89 per share, even though the per-share loss excluding unusual items, $1.74, was nearly $1 per share more than the 75 to 80 cents that Wall Street had been expecting. The company also reiterated that it was uncertain of whether it would be able to successfully restructure its debt outside of the bankruptcy courts.

Another trader said that the market apparently shrugged off whatever Axle worries it may have had, seeing the 7 7/8s at 42.5 bid, 43 offered late in the day - well up from 39.5 bid, 40 offered at the opening, and well above Tuesday's levels around 36, "so they were up pretty good."

Axle's other issue, the 5 ¼% notes due 2014, were seen having firmed as much as 4 points on the day, around 42.

A trader meantime heard Ford Motor Co.'s 7.45% bonds due 2031 down 2 points at 75 bid, 77 offered, while rival GM's benchmark 8 3/8% bonds due 2033 were down 0.25 point at 16 bid, 17 offered.

GMAC, ResCap firmer

GMAC and ResCap debt was largely unaffected by analyst comments calling for the demise of ResCap - in fact, the bonds moved up.

A trader said the 7¼% notes due 2011 - the day's most active issue, he said - inched up to around 94, though he noted that was down from the week before.

He meanwhile saw ResCap's 9 5/8% notes due 2015 around 64, up from 62, and the 6 3/8% notes due 2010 at 69 bid, 70 offered. He called the latter issue up a point.

Another market source saw GMAC's 6 7/8% notes due 2012 gaining more than a point to 91.25 bid, while another source saw the benchmark 8% notes due 2031 fall a point to 74.25 bid, 75.25 offered.

The second source also pegged ResCap's 8 7/8% notes due 2010 at 73 bid, 74 offered, up 3 points.

According to several news outlets, CreditSights Inc. analysts said GMAC should keep the "remaining good assets" of ResCap and toss the others. ResCap has posted losses of at least $1 billion per quarter since the third quarter of 2007.

"The future value may have fallen below the cost of keeping ResCap alive," the research report read. "We see no real pragmatic reason for GMAC to absorb another $2 billion-plus quarterly hit."

GMAC also posted preliminary second-quarter results Wednesday. The results showed an after-tax net loss of $3.9 billion, compared with $2.5 billion the year before.

"While difficult economic conditions persist, GMAC is encouraged by positive trends such as improving origination levels in both the auto and mortgage segments," the company said in the earnings release. "Additionally, GM and Chrysler have exited bankruptcy, which should lead to a more stable U.S. auto industry."

"The second quarter, like many prior quarters, produced a series of transformational actions, including creating a more flexible capital structure by incorporating GMAC, launching Ally Bank, restructuring the ownership of the company, and expanding our base of auto financing customers through the Chrysler agreement," said Alvaro de Molina, GMAC top dog, in the release. "Our work is not over, but the foundation is being laid."

Broad market tidbits

Elsewhere in the distressed arena, Ford Motor Co.'s "short" 7½% notes due 2012 ended at 92 bid, 93 offered - "exactly where they have been," a trader said - on about $40 million traded.

American International Group Inc.'s 8.175% notes due 2058 meanwhile closed around 32.5, with about $60 million changing hands.

Paul Deckelman contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.