GM, Ford bonds, bank debt, down as sales slide; VeraSun's unsecured bonds off on Chapter 11

By Paul Deckelman and Sara Rosenberg

New York, Nov. 3 - General Motors Corp. and Ford Motor Co. started the new month off in recently very familiar fashion - their junk bonds were seen down multiple points, while their term loans, as well as those of rival Chrysler LLC's financial arm, were all on the slide, after Detroit's traditional "Big Three" domestic carmakers reported sharp slides in their respective October sales figures.

Outside of the autosphere, VeraSun Energy Corp.'s unsecured bonds took a plunge, as did the company's shares, on the announcement well after the market close Friday that the Sioux Falls, S.D., ethanol producer had filed for Chapter 11 protection. VeraSun has lined up debtor-in-possession financing to enable it to continue operating while it reorganizes.

Pilgrim's Pride Corp.'s bonds were mixed, with the subordinated issue again off, investors still jittery about an analyst's warning Friday that the Pittsburg, Tex.-based poultry producer might also be headed for the bankruptcy courts.

Hexion Specialty Chemicals Inc.'s bonds, and those of Huntsman International LLC, were lower in the wake of Friday's court ruling refusing to extend a commitment letter obligating Hexion's banks to fund its $6.5 billion acquisition of Huntsman.

Poor sales figures pound carmaker paper

The major automobile makers were out with their October sales data on Monday - and as expected, the news was anything but good, and bond and bank debt investors reacted accordingly.

A trader saw GM's benchmark 8 3/8% bonds due 2033 fall to 26 bid from on Friday, although he called GMAC's 8% bonds due 2031 unchanged at 45 bid, 47 offered.

However, another trader, while quoting the GMAC '31 bonds at that same 45 bid, level, called it a 2½ point loss on the day versus Friday, while the lending arm's 6¾% notes due 2014 had dipped to 48 bid from 50.75 on Friday.

He further said that the GM benchmark bonds dropped all the way to 27 bid in round-lot trading from levels as high as 36.5 bid on Friday. Over $10 million of the bonds changed hands - a fairly sizable amount for a relatively light trading day.

"There was downward movement on the simply horrendous auto [sales] numbers," he declared, also seeing GM's 7.20% notes due 2011 nearly 2 points lower at 40.25.

The trader additionally saw Ford's signature issue, the 7.45% bonds due 2031, drop to 30.5 bid, down nearly 2 points on the day.

A market source at another desk saw the GM 8 3/8s off by over 5 points at 31, and the 6¾% notes due 2014 down nearly 3 points in busy trading to 48, but saw GMAC's 8s actually up more than ½ point at 45.

Auto loans lower

In the bank loan market, GM, Ford and Chrysler Financial Services LLC all saw their term loans slide, a trader said. GM's term loan was being quoted at 49½ bid, 52½ offered, down from 52½ bid, 56½ offered on Friday.

Ford's term loan retreated to 51½ bid, 54½ offered, down from Friday's levels of 54 bid, 55½ offered, the trader continued, while Chrysler Financial's first-lien term loan was quoted at 65½ bid, 68½ offered, down from 67½ bid, 70½ offered on Friday.

The domestic carmakers' results were hurt by a drop in retail demand, observers said; Detroit-based GM - still barely hanging on to its coveted status as the biggest-selling U.S. carmaker in the face of its prolonged sales decline and the challenge from Japanese upstart Toyota - delivered 170,585 vehicles last month, down 45% from a year ago. Truck sales were 97,119, down 51%, and car sales were 73,466, down 34%.

Dearborn, Mich.-based Ford delivered 132,838 vehicles in October - down 30.2% versus 190,195 last year. Truck sales were 88,267, down 30.3% from 126,622, and its Ford, Lincoln and Mercury car sales were 40,854, down 26.8% from 55,812.

Auburn Hills, Mich., based Chrysler saw October sales of its Chrysler, Dodge and Jeep vehicles fall to 94,530 vehicles, down 35% from 145,316 vehicles last year.

Pilgrim's Pride investors still squawking

Pilgrim's Pride appeared to steady on Monday after Friday's slide, although there seemed to still be some weakness in its subordinated notes. A trader said that "PPC was right where it was for the most part," with the 8 3/8% subs due 2017 "up and down" in a low-teens context. "Figure 12 to 15 probably covers it," while its 7 5/8% notes due 2015 held in the 30s.

At another desk, a trader saw the 7 5/8s at 33, which he said was "not down - that's shocking," but was actually up a point. He meantime saw the 8 3/8s at 11.25, well down from 17 on Thursday.

Another market source saw the latter bonds fall to around 11 from a close of 15.5 on Friday.

The company's bonds had slid on Friday after a CreditSights analyst suggested that the troubled chicken producer faced a strong possibility that it might have to file for bankruptcy in December, when the 30-day grace period on its non-payment of interest on the two series of notes is scheduled to expire. Pilgrim's Pride was supposed to have made the Nov. 1 coupon payment of $25.7 million on the notes on Monday, but said last week that it would instead use the grace period to explore financial alternatives. It also said that its bank debt lenders had extended an existing temporary waiver of meeting certain credit facility covenants through Nov. 26, and had agreed to meanwhile provide continued liquidity under the credit facilities during that same period.

Despite that temporary breathing room, analyst Edward Mui said in a research note Friday that a Chapter 11 filing once the grace period on the making the bond interest expires in early December is "highly probable."

VeraSun gyrates after Chapter 11 filing

Chapter 11 meantime became a reality for VeraSun Energy, which announced late Friday, hours after the financials markets had closed, that it had filed with the U.S. Bankruptcy Court in Wilmington, Del. for protection from its junk bond holders and other creditors

That sent its bonds lower and its New York Stock Exchange-traded shares absolutely nosediving on Monday, although both did improve from their lows.

A market source saw the company's 9 7/8% senior secured notes due 2012 opening at 41, around the same level they had finished on Friday, and then gyrate around, hitting a low of 37.5 and a high of 44, before finally closing around 40, down 1.5 points on the day. However, another source, quoting the bonds only on a round-lot basis, said that the final big-block trade at 44.5 left the bonds up 3 points on the day.

The 9 3/8% senior unsecured notes due 2017 were seen lower, having opened at 4.5 bid, down 3 points. While the bonds did edge their way back to a 6.75 close, the source said, on a round-lot basis, they finished at 4.75 - well down from Friday's round-lot finish at 8.5.

However, another trader, asked where VeraSun's bonds went, replied "they didn't. I think that was kind of pre-priced in." He saw the 9 3/8s trading around 4.5, while the 9 7/8s stayed around 43-46.

VeraSun's NYSE-traded shares meantime plunged as much as 52% before finally coming off their lows to end at 28 cents - down 20 cents, or 41.67%, on volume of 2.7 million shares, triple the norm.

VeraSun said it was filing for bankruptcy to "enhance liquidity" while the company and 24 of its subsidiaries reorganize. It suffered significant third-quarter losses from a dramatic spike in its corn costs, reflecting costs attributable to its corn procurement and hedging arrangements and historically unfavorable margins.

In connection with the bankruptcy filing, VeraSun has secured a commitment for up to $190 million of debtor-in-possession financing from its secured noteholders to fund the working capital needs of the VeraSun debtors.

UBS Securities LLC is lead arranger, documentation agent and syndication agent for the noteholder facility. The administrative agent has not yet been selected.

Interest will be 16.5%. The loan will mature one year from closing.

Meanwhile, AgStar Financial Services PCA has agreed to provide up to $30 million in DIP financing to fund the working capital needs of the company's seven US Bioenergy debtors.

Interest on the AgStar DIP loan will be Libor plus 700 basis points. The facility will mature on Nov. 3, 2009.

The company said it does not expect to scale back its purchases of raw materials, and corn and other suppliers are expected to continue to be paid in full for all goods and services furnished after the filing date.

Idearc is improved

Back among the bond players, Idearc Inc.'s 8% notes due 2016 were seen by a trader up a point on the session at 14 bid, 16 offered, while at another desk, the Dallas-based telephone directory publisher's recently badly-battered bonds were being quoted as high as 19 bid, a 5 point rise on the day.

Another trader said that the bonds were "maybe the second most-active" junk issue, with over $15 million changing hands, but he added the caveat that "it was not at all an active day - there was limited volume. " He pegged the bonds up a point at 15.5 bid.

Gaming sector 'sitting there'

A trader said that the gaming sector was "just kind of sitting there." He said that Harrah's Entertainment Inc. "is suffering, obviously," with Trump Entertainment Resorts Inc. also languishing at lower levels.

He said there was "not a lot of trading - certainly not as much as I would have expected, but that may be the nature of the beast." He said that Tuesday's closely watched U.S. elections, particularly the presidential race, were stilling overall activity. "People are just kind of hanging."

He saw the Trump 8½% notes due 2015 at 25.5 bid, and then 26, "but it was all early - then it just stopped."

He likewise saw Harrah's 10¾% notes "trading a few times. They'd fought back up last week to the 35-36 range - but now, they're right back around 32.5-34. That covers it." He said there was 'not a lot" of activity - "just a couple of million [dollars worth of] bonds, maybe, traded, not much more than that."

Huntsman, Hexion hurt as banks can walk

A trader said that he "didn't see a thing" in Huntsman International's bonds in the wake of Friday's court decision that effectively allows the banks that committed to funding the $6.5 billion deal by rival chemical manufacturer Hexion to acquire Salt Lake City-based Huntsman to just walk away. The lenders had signed a letter committing to the funding when the deal was announced in the summer of 2007, before the credit crunch began - but that letter had an expiration date of last Friday.

The trader said that they were "quoted down - I didn't see any trades - there might have been some that I did not see, but I didn't notice any."

At another desk, the company's 7 3/8% notes due 2015 were being quoted having fallen as much as 19 points down to the 70 level - but again, nobody had any hard evidence of trades.

"That's the nature of the beast lately," the first trader said. "Some stuff you get tons of trading and not a lot of news. Some, you just get prices changed [on the sheets] but nothing actually trades to prove it one way or another."

Yet another trader saw no movement at all in the 7 3/8s, although he did see its 7 7/8% notes due 2014 trading at 79, which he called down some 11 points from the bonds' previous trading levels at 90, earlier last week.

He also saw Hexion's 9¾% notes due 2014 at 54, down 10 points on the day.

Fallen financials are mixed

Among the onetime investment-grade financials that now trade around at the lower end of the junk spectrum, a market source saw Lehman Brothers Holdings Inc.'s 3.95% notes slated to come due just a year from now up more than a point on the day at "13 and change," pretty much in line with the failed New York-based investment bank's other paper.

Also higher, a trader said, was bond insurer MBIA Inc.'s 14% surplus notes due 2033, by a point to 68 bid.

The 5.375% notes due next Sept. 1 of American General Finance, a division of the troubled insurance giant American International Group Inc., was seen up more than 2½ points around the 63 level.

Meanwhile, failed Seattle-based thrift Washington Mutual Inc.'s 4 5/8% subordinated notes due 2014 dropped by a point to around the 20 level.

However, its senior holding company notes, like the 4% paper coming due on Jan. 15 bounced around at levels as high as 63 before coming off that peak to end at 61 - down more than point from its opening levels, but still up nearly a point from Friday's close.

However, at another desk, a trader opined that "even the stuff that had been active of late, the sub[ordinated] and holdco things like WaMu and Lehman , none of it really traded."

Builders steady despite new data

Elsewhere, a trader saw Beazer Homes USA Inc.'s bonds pretty much the same, with the Atlanta-based builder's 8 3/8% notes due 2012 at 47 bid, 52 offered, while its 6½% notes due 2013 and 6 7/8% notes due 2015 and the 8 1/8% notes due 2016 were all at 40 bid, 42 offered.

However, he said that the company's 8 5/8% notes due 2011 were "in their own little world, quoted in the mid-60s, for some reason."

He also saw Standard Pacific Corp.'s 7% notes due 2014 down a point at 50 bid, 52 offered.

The builders' bonds were fairly steady, despite that latest bad news on the economic front - while the Commerce Department reported that overall construction spending declined by 0.3% in September, less than half of the roughly 0.8% downturn that many economists had expected, construction of single-family homes plummeted by 4.7% - its 30th consecutive monthly downturn.

© 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.