GM, First Data continue drop as distressed market struggles; wrinkle for paper names

By Kenneth Lim

Boston, May 19 - The distressed market continued to weaken across the board on Wednesday, with General Motors Corp. losing ground for the second day in a row.

First Data Corp.'s negative momentum did not abate as the bonds remained stuck in the week's slide.

A number of paper-industry names were also seen lower in line with the broader market's decline. Smurfit-Stone Container Corp. and NewPage Corp. were both seen lower by a few points.

The distressed market in general continued to ease on Wednesday as money continued to leave for safer waters.

"Everything in general is a bit weaker again today," one trader said. "All sorts of sectors."

Investors have been getting out of the distressed bond market because of uncertainty over Europe's debt crisis, the trader explained.

"Last week you had $1.7 billion in outflows," the trader said, referring to the mutual fund flow figures for high yield portfolios compiled by AMG Data Services. "And with what's been going on with the euro and Europe, people are trying to de-risk, and I think that's certainly contributing to what's happening here. High beta names will take a hit."

GM continues rollback

General Motors' 8.375% bonds due 2033 were active, but slipped by about 1.5 points to 32.5 on Wednesday, although the move was seen as being in sympathy with the broader market's decline.

"It's not that there was necessarily anything going on with them, but the whole market's down," a trader said.

The Detroit, Mich.-based auto maker on Monday announced its first quarter of profit since 2007, beating Street expectations with earnings of $865 million in the period ended March 31. The news sent the bond rallying to about 36 on Monday, but the bonds have since backed off the week's highs.

First Data under pressure

First Data's bonds were also lower on the day, continuing the freefall after the company reported disappointing results before the weekend.

First Data's 9.875% notes due 2015 closed a touch lower than their Tuesday close of 85 bid, 86 offered. The 11.25% notes due 2016 were seen at 76 bid, 76.5 offered on Tuesday, while the 10.55% notes due 2015 were seen at 81 bid, 82 offered.

"That's gotten hit the past couple of days, it continued to get hit today," the trader said.

First Data, a Sandy Springs, Ga.-based electronic commerce solutions provider, on May 14 said EBITDA was $424 million in the first quarter of 2009, down from $472 million a year ago. Investors had been hoping that the company would be able to raise capital through an initial public offering, but the poor results have pushed that scenario a little farther beyond reach.

Paper names crumple

A number of paper names were also lower on Wednesday, in line with the general market.

Smurfit-Stone Container's 8.25% bonds due 2012 were seen at 87 bid, 88 offered, down by about 3 points on the day.

The Chicago-based paper packaging company is on its way out of Chapter 11 proceedings, with a Canadian judge last week approving Smurfit-Stone's reorganization plan. The company is now seeking approval from a U.S. judge for those plans. The company has also been named as a potential acquisition target for International Paper.

NewPage's 11.375% bond due 2014 also came off about 2 points to 94 at the end of the day.

"Some of the paper guys were down," a trader said.

Another trader saw NewPage's 10% notes due 2012 down about 4 points on the day to 58. A second trader said the Miamisburg, Ohio-based coated-paper maker's bonds were down close to 6 points.

Verso Paper Corp.'s 11 3/8% notes due 2016 were down about 5 points at 86, according to one trader. And a second trader said the Memphis, Tenn.-based paper company's bonds were down 5.5 points on the day.

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