GM gets boost on debt swap; Smithfield bonds hurt by swine flu worries; Capmark active, better

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., April 27 - General Motors Corp. was the nom du jour Monday, as the company announced a debt-for-equity swap.

The carmaker's debt structure got a decent boost on the back of the news, with the bonds gaining anywhere from 1 to 3 points and the bank debt likewise moving higher. Still, skepticism remains about the restructuring proposal.

Meanwhile, the recent swine flu pandemic caused Smithfield Foods Inc.'s bonds to fall as much as 5 points on the day. The company has said that there were no traces of the virus in its production plants.

Capmark Financial Group Inc.'s debt inched up a tad in active trading, traders reported. There was no fresh news to explain the move, though last week the company reported its quarterly financials and warned of a possible Chapter 11 filing.

GM structure gets a boost

General Motors' bonds got a boost on the back of the company's debt swap news and its bank debt also took a turn for the better.

In the bonds, a trader said the "majority of the structure was up 1 to 3 points. He saw the benchmark 8 3/8% notes due 2033 at 10, a gain of more than a point, with about $35 million trading. He also saw the 8¼% notes due 2023 at 9.5 and the 7.2% notes due 2011 at 11.5, both up about 2 points.

Another trader quoted the Detroit automaker's bonds generically at 9 bid, 11 offered, versus 8 bid, 9 offered last week. He added that the benchmark issue was the single biggest trader of the day.

The term loan was quoted by one trader at 63 bid, 64 offered, up from Friday's levels of 58 bid, 59 offered and from Monday morning's levels of 59 bid, 61 offered, while a second trader had it quoted at 62 bid, 65 offered.

And, the company's revolver was quoted at 53 bid, 55 offered, up from 47½ bid, 49½ offered at the end of last week, the trader added.

On Monday, General Motors said that it is commencing offerings to exchange $27 billion of its unsecured public notes for a 10% equity stake.

The exchange offers will expire on May 26.

Consummation of the exchange offers are contingent on various factors including voluntary employee benefit association modifications and U.S. Treasury debt conversion conditions that would result in an at least $20 billion reduction in liabilities.

According to General Motors, the exchange offers are a vital component of its overall restructuring plan to achieve and sustain long-term viability.

The company went on to say that if it does not receive prior to June 1 enough tenders of notes to consummate the exchange offers, it expects to file for bankruptcy.

"We are taking tough but necessary actions that are critical to GM's long-term viability," said Fritz Henderson, president and chief executive officer, in a news release.

"Our responsibility is clear - to secure GM's future - and we intend to succeed. At the same time, we also understand the impact these actions will have on our employees, dealers, unions, suppliers, shareholders, bondholders and communities, and we will do whatever we can to mitigate the effects on the extended GM team," Henderson added.

But despite the desire to complete a restructuring out of court, bondholders are not warmly embracing the debt swap. In a Bloomberg report, a "person familiar with the committee representing creditors" said that the deal was unlikely to succeed. Other market players interviewed in the article deemed the exchange as doomed to fail.

"The exchange offer that General Motors announced this morning must look to bondholders like something Tony Soprano dreamed up," wrote Gimme Credit analyst Shelly Lombard in an afternoon comment. "It's pretty heavy-handed and doesn't offer much in the way of options... Although there could be some negotiating room, this offer doesn't seem designed to bring bondholders back to the table."

Smithfield hurt by swine flu

The advent of swine flu was blamed for losses in Smithfield Foods' bonds, traders reported.

A trader called the 7¾% notes due 2013 down 5.25 points at 68.5, while the 7¾% notes due 2017 dropped more than 2.5 points to 64.25. The 7% notes due 2011, however, were unchanged around 80.

Another trader quoted the 2013 issue at 68.5 bid, 69.5 offered, versus 73 bid, 74 offered on Friday. He also saw the 7% notes at 79 bid, 80 offered, down from 83 bid, 84 offered.

Thus far, 72 confirmed cases of the new virus strain have been found, according to USA Today, with six cases in Canada, 26 in Mexico and 40 in the United States. More than 1,600 suspected cases of the flu have been cited in Mexico, France, Israel, New Zealand and Spain. Of those suspected outbreaks, 1,614 came from Mexico.

Researchers say that the new flu bug is a genetic hybrid of human, avian and swine strains.

Still, Smithfield has said that it has not found any signs of the disease at its Mexico plants. Moody's Investors Service maintained its rating on the company, stating that the pandemic has not had time to severely affect the company.

Capmark posts gains

Capmark Financial Group's debt traded actively and slightly better during the first trading session of the week, though there was no news to explain the move.

A trader said about $25 million of the 6.3% notes due 2017 traded up nearly a point to 24.25. The 5 7/8% notes due 2012 were a tad better in the 26 context.

At another desk, a trader quoted the 6.3% notes at 24 bid, 25 offered, up from 23 bid, 24 offered last week.

Last week, the Horsham, Pa.-based financial services provider posted a $1.1 billion loss and warned that bankruptcy could be in its future.

Elsewhere in the world of financials, Zions Bancorp's 5½% notes due 2015 were seen around 55 bid.

American International Group Inc. unit International Lease Finance Corp.'s 5.65% notes due 2014 gained 2 points on the day to end at 59 bid. However, the company's 4 7/8% notes due 2012 were seen down several points to the 84 area.

General Growth Properties Inc. unit Rouse Co.'s 8% notes slated to mature at the end of this month were seen several points firmer on the day, a market source said, pegging the bonds at around the 50 mark.

Broad market mixed

Among other issues in distressed territory, Freescale Semiconductors Inc.'s 10 1/8% notes due 2016 moved up to 20 bid, 21 offered from 19 bid, 20 offered.

"It didn't change much, but it was pretty active," a trader said.

Last week, the chipmaker said it would close its plants in Japan and France.

Freeport-McMoRan Copper & Gold Inc.'s 8 3/8% notes due 2017 were, as always, active, according to a trader. He placed the paper at 97, deeming that half a point softer.

In the housing sector, Beazer Homes USA Inc.'s 6 7/8% notes due 2015 were seen by a market source around 30.5 bid.

At another desk, a trader saw Beazer's 8 3/8% notes due 2012 in a 36-38 bid range, while its 8 1/8% notes due 2016 held around 29 bid. He also saw most Hovnanian Enterprises Inc. bonds, like its 6½% notes due 2014, in a 33 to 35 context.

Paul Deckelman contributed to this article.

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