Nortel firms on Ciena asset sale; GM softens as exec readies to leave; CIT under pressure

By Stephanie N. Rotondo

Portland, Ore., Oct. 7 - Nortel Networks Corp. gained some ground in Wednesday trading, traders reported, after the company said it had come to terms on an asset sale.

Earlier in the week, Nortel confirmed it was in discussions with Ciena Corp. regarding the sale of its ethernet unit. The parties announced the terms of the proposed sale on Wednesday, giving Nortel's bonds a moderate boost.

Meanwhile, General Motors Corp.'s notes ended the day slightly softer, according to traders. The declines came as the company announced a top executive was departing his post.

CIT Group Inc. continued to be active, though not nearly as much so as last week's surge. Traders saw the bonds remaining under pressure, and one speculated a pre-packaged Chapter 11 filing was more likely.

Nortel firms on Ciena asset sale

Nortel Networks' bonds were "kind of active" and a tad better during mid-week trading as word came out that the company had come to terms with Ciena on an asset sale.

A trader saw the 10¾% notes due 2016 at 60 bid, 61 offered, up slightly from 59½ previously.

"So not much changed really, maybe a little bit," a trader said.

The 10 1/8% notes due 2013 meanwhile ended around "59 and change" on "just a couple of trades."

Earlier in the week, both Nortel and Ciena confirmed that they were in "advanced discussions" regarding the sale of Nortel's optical networking and carrier ethernet businesses. On Wednesday, it was announced that the two parties had agreed upon a price for the asset: about $521 million.

The price includes $390 million in cash and 10 million shares of Ciena stock. At it current price, the total value of the stock is about $131 million, according to a press release.

Also, at least 2,000 of Nortel's current employees would be offered positions with Ciena.

"Today's announcement is a positive step forward for the future of Nortel's optical networking and carrier ethernet customers and employees," said Philippe Morin, president of Nortel's Metro Ethernet Networks division, in the release. "The sale of these businesses to a strong and stable buyer enables the innovation of one of the foremost leaders in the optical industry to continue to thrive.

"Employees have done a tremendous job stabilizing our business under challenging conditions while continuing to deliver on product and service commitments."

The sale of the unit is not the first to occur since Toronto-based Nortel filed for bankruptcy earlier this year. The company received $1.13 billion from Ericsson AB for its wireless assets and another $915 million from Avaya Inc. for its corporate phone gear unit.

Still, while many market players do see some upside for both parties, there are still some concerns.

Standard & Poor's, for example, placed Ciena on CreditWatch with negative implications on the news. The agency said the action was due to "concerns that liquidity will be significantly depleted over the next 12 months."

GM softens as exec readies to leave

General Motors' debt traded lower as the company announced a top executive was leaving and provided an outline for its last 90 days of progress.

A trader called the 7 3/8% notes due 2048 off about half a point to around 14. He said the issue had been trading between 14½ and 14¾ on Tuesday.

The trader also saw GM's bellwether issue, the 8 3/8% notes due 2033, at 14¾ bid, 15 offered, down from levels near 15¼ previously.

Another trader said he "saw some paper trade around 15 [bid], 16 [offered].

"Not a lot though," he added.

Mark R. LaNeve, head of U.S. sales, will leave his post by Oct. 15, the company said during a conference call. The departure comes after the company reported a 45% decrease in sales for September.

But GM was quick to point to the positive things it has done since its emergence from bankruptcy. In a press release entitled "General Motors Outlines 90 Days Of Progress Accelerates Its Focus On Customers, Cars And Culture," GM said it "has made demonstrable progress in positioning the company for success; putting in place a new global operating structure, a leaner and more streamlined executive leadership team, and a reconstituted board of directors.

"Emerging is a new GM with a cleaner balance sheet, fewer employees, an improved cost structure, a stronger dealer network, and streamlined global operations," the release said.

"Over the past 90 days since we created the new GM, we've already launched a number of new, fuel-efficient, highly successful cars and crossovers; introduced a new marketing campaign that highlights our best-in-class fuel economy, quality, warranty and safety performance; sworn in a new board of directors; and overhauled our management," said Fritz Henderson, president and chief executive officer, in a news release.

"We are taking aggressive actions and moving quickly to transform our culture into one that is truly customer focused.

GM is a Detroit-based automaker.

CIT under pressure

CIT Group's notes "continue to drift lower," a trader said.

"Everything seems to be converging," he said, noting that most paper maturing in 2010 or later was trading in a "64 to 65 zip code," compared to 66 bid, 67 offered previously. "The probability of some kind of pre-pack is rising."

The trader also saw that 2009 issues move lower to 67 bid, 68 offered from levels in the low-70s on Tuesday.

Another trader said CIT was active, "but not like they have been." He said the 4¾% notes due 2010 were the day's most active issue, which fell to 63 bid, 64 offered.

"That's down a couple from yesterday, down 3 from Monday," he said.

CIT is attempting a debt exchange aimed at cutting its overall debt by $5.7 billion. However, the New York-based lender is also soliciting votes on a pre-packaged bankruptcy in the event the swap is not successful.

Harrah's notes mixed

Harrah's Entertainment Inc.'s 6½% notes due 2016 held steady at 56 bid, 57 offered, a trader said.

Another source called the 10¾% notes due 2016 "a little lower" at 79½ bid, 80 offered.

At another desk, the 5¾% notes due 2017 were seen down 2 points to 541/2.

© 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.