First Data continues fall; GM gives up earnings-driven gains; Harrah's, Smurfit-Stone off

By Kenneth Lim

Boston, May 20 - The distressed bond market trudged through another down session on Thursday as jittery investors continued to push prices lower.

First Data Corp. continued to be beaten down by a nasty combination of poor results and negative market sentiment.

Meanwhile, General Motors Corp. retreated further from its recent rally. The weak market also dragged down bonds of Harrah's Entertainment Inc. and Smurfit-Stone Container Corp.

The overall distressed market gave up more ground on Thursday as growing fears about Europe's debt problems continued to weigh on investors.

"The market was lower," one trader said. "I would call it, on the day...about 1 to 3 points lower."

The trader said the struggling equity market spooked an already nervous market.

"The equity market closed at the absolute low, down 100 points in the last 10 minutes," the trader said, referring to the Dow Jones Industrial Average's 376-point drop on the day for a 10,068.01 close.

But the market's steep cheapening suggests that there could be good bargains for investors who believe that a rebound is in the works, or for those who want to pick up some yield.

"Stuff's really, really widened out," the trader said. "The spreads over Treasuries are ridiculous."

First Data slides further

First Data's bonds continued to slide a week after the company reported disappointing financial results.

The benchmark 9 7/8% bonds due 2015 lost another 2 points to close around 80.5, while the 10.55% notes due 2015 gave up 2 points to end at 74.5.

The 9 7/8% notes were trading at around 89 a week ago, while the 10.55% paper was marked at 86.

"FDC has been real active," the trader said. "They're down across the board."

First Data, a Sandy Springs, Ga.-based electronic commerce solutions provider, on May 14 reported a first-quarter loss of $240 million, wider than its year-ago loss of $231.3 million. The poor results dashed hopes that the company, which was taken private by Kohlberg Kravis Roberts & Co. in 2007 using debt, would be able to raise capital through an initial public offering.

The numbers came at a bad time for bondholders of First Data, with the European debt crisis chasing money away from investments perceived as too risky.

"It's a combination of bad numbers a few days ago and just the market in general," the trader said.

GM stuck in reverse

GM's 8 3/8% notes due 2033 were down another 2 points on Thursday to close around 32.5.

"GM's actually getting beat up," the trader said. "They popped back up after the numbers, went back to 37, 38, but now they're down to 32.5."

The notes had gotten a boost after the company reported a quarterly profit, but since then prices have fallen as the broader market's weakness overwhelmed the auto maker's positive earnings.

GM is based in Detroit, Mich.

Harrah's, Smurfit-Stone take hits

The price declines seemed to hit across the board.

Harrah's 10% notes due 2018 were one of the top names among the most active issuers on Thursday, and the paper eased 2 points to close at 77.

Harrah's is a Las Vegas-based gaming company.

Smurfit-Stone Container's 8¼% notes due 2012 were also well-traded but slipped 2 points to 85.5.

Smurfit-Stone is a Chicago-based paper packaging company.

GM, Harrah's and Smurfit-Stone are all victims of the current market malaise, the trader said.

"It's more the market," the trader said. If "you look at the whole market, it's down 1 to 3 points, so it's not really company specific for the most part."

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