GM, Ford up despite continued sales decline; Boyd easier on big spending plans

By Paul Deckelman and Paul A. Harris

New York, Jan. 4 - General Motors Corp. and Ford Motor Co. bonds were seen better Wednesday even though the twin Detroit giants reported yet another month of sales declines in December, with traders opining that perhaps the sales figures weren't quite as bad as originally feared.

Bonds of GM's former subsidiary, Delphi Corp., were seen higher. Although there was some positive news out about the bankrupt Troy, Mich.-based automotive electronics manufacturer, market participants thought the gain was more likely due to short covering.

Boyd Gaming Corp.'s bonds were easier on the session after the Las Vegas-based gaming company announced plans to spend $4 billion to develop a new resort complex on the Las Vegas Strip, which led Standard & Poor's to revise its outlook on Boyd's credit ratings.

The primary market continued along in a calendar-building mode, with roadshow details emerging on Germans medical services company Fresenius AG's planned €1 billion two-part mega-deal.

A buy-side source marked the broad high-yield market up three-eighths of a point to half-a-point on Wednesday.

"High yield has had a great day," the investor said.

"Somebody described it as the perfect mix. The Fed is coming to the end of its tightening cycle. Growth has slowed down but it hasn't become too slow. And if there is anything amiss in the world it's inflation.

"It's not a bad environment."

A trader said that while "not a whole hell of a lot" of activity was taking place, "the tone of the market, across the board, was positive, following equities for the most part."

He said GM's benchmark 8 3/8% notes due 2033 "felt better," having moved up to 68 bid after the release of the vehicle sales data for December and for 2005 as a whole, from Tuesday's levels around 66 bid, 66.75 offered.

"Of course [the sales numbers] were off, but I think people were expecting that, and the stock was up 51 cents, so it must have been better than people expected," he theorized.

While another trader saw those '33 bonds unchanged at 67 bid, 68 offered, he saw the bonds of the GM financing unit, General Motors Acceptance Corp., firmer, with GMAC's 8% notes due 2031 up a point at 99 bid, par offered.

A market source saw a rise in GM across the board, with the carmaker's 8 3/8s up 1¼ point on the day at 67.75 bid, and its 8¼% notes due 2013 at 66.25, up two points on the session. He saw GM's 6 3/8% notes due 2008 a point better at 74.25, and pegged its 7.20% notes due 2011 half a point higher at 70 bid. He saw GMAC's 8s at just below 99.5, while Ford's signature issue, the 7.45% notes due 2031, were 1½ points better at 70.

A source at another desk projected GM's 7 1/8% notes due 2013 a point better at 68.5, while GMAC's 6 7/8% notes due 2012 were also a point ahead at 91.5. The GM 8 3/8s were a point up at 67.5 bid, while Ford's 7.45s were also up a point, to 70.

Equity holders apparently also thought the sales numbers weren't too bad, with GM's New York Stock Exchange-traded shares up 51 cents (2.70%) to $19.41 while Ford's stock was up 18 cents (2.30%) to $18.01.

GM reported a 4% drop in U.S. sales in 2005 versus a year earlier, with total domestic vehicle sales sliding to just under 4.52 million units. Car sales were down 7% and the truck side retreated 2%. For December, GM sales fell 10% from year-earlier levels to 392,041 vehicles, with car sales plunging 19.4% and truck sales off 4.9%.

Those December figures were about in line with Wall Street's expectations.

However, there were a few rays of hope for the world's largest carmaker, as its Chevrolet nameplate beat out Ford as the top-selling U.S. brand in '05 - the first time Chevy's held the top spot since 1986. GM meantime said that Cadillac, Saab and Hummer helped the company's luxury business grow in the face of the overall decline.

Ford, despite the blow to its prestige from having lost the coveted Number One sales slot to Chevy, had its own straw at which to grasp in the midst of the otherwise negative number - its U.S. car sales rose 2% on the year - the first such gain since 1999. But Ford's truck sales fell 8% from 2004 levels, due to higher gasoline prices. Overall, its 2005 U.S. vehicle sales were down 4.9%, to just under 3.17 million.

For December, Ford domestic vehicle sales fell 9% to 267,881 from year-ago levels, with car sales off 5.8% and truck sales down 10.2%. Analysts had on average forecast a sales decline of 11.2%.

Delphi strong

Elsewhere, Delphi's bonds were seen solidly higher despite having not much fundamental reason to go up, leading one trader to dismiss the move as mere short covering. He saw the company's bonds (all four issues trade on top of each other as the company undergoes reorganization) as having firmed smartly to 54 bid, 56 offered from 51 bid, 53 offered.

A market source saw Delphi's 6½% notes due 2010 advance to 54.75 bid from 51.25, while its 7 1/8% notes due 2029 rose even more, to 54.75 bid from prior levels at 50.5 bid.

While Delphi announced that it had become a strategic investor and technology provider for Ondas Media SA, the premier European satellite radio company - this on top of an earlier announcement about Delphi being granted a substantial portion of the satellite receiver business for Hyundai Motor America - a trader said that those pieces of news were nice, but in his view did not constitute enough of an impetus for a three-point gain.

"I don't think that's enough to boost that paper, he said, adding: "Lower-rated paper just seems to be in vogue right now."

Dana rises further

Fellow parts maker Dana Corp. - whose bonds had improved handsomely on Tuesday, most traders said, after Standard & Poor's removed the company's ratings from negative CreditWatch following its completion of re-auditing financial results going back as far as 2000 - was again strong on Wednesday.

The Toledo, Ohio-based automotive systems maker's 7% notes due 2028 were seen by a market observer about an additional quarter to half point. He saw Dana's 7% notes due 2029 at 73 bid, up from 72.5.

AK Steel up

Outside of the automotive arena, a trader saw AK Steel Corp.'s bonds a point better, although he saw no news out about the Middletown, Ohio-based producer of specialty steels.

"There was no news on them - but a lot of stuff was up on 'no news'," he said, quoting AK's 7¾% notes due 2012 at 91.25 bid, 92.5 offered and its 7 7/8% notes due 2009 at 95.5 bid, 96.25, both up about ¾ point from Tuesday's finish.

Boyd dips on resort plans

Boyd Gaming's bonds were seen down about half a point on the day on the news that the company plans to build a $4 billion resort, Echelon Place, in Las Vegas (see related story elsewhere in this issue).

A market source saw Boyd's 7¾% notes due 2012 at 104.75, down half a point on the day.

At another desk, a source also saw those bonds down 1/2, pegging them at 104.25. He saw Boyd's 6¾% notes due 2014 a point lower at 98.5

Boyd, a trader said, "traded off a touch but nothing crazy, nothing major." He saw the 63/4s at 98.5 bid, 99.5 offered, down half a point.

Boyd, in announcing its $4 billion project, said that the retail and casino development, to be built on a 63-acre site on the Strip, would include four hotels featuring 5,300 guest rooms and suites and would open in early 2010. Boyd said that the centerpiece of the complex would be the $2.9 billion Echelon Resort, to be wholly owned by Boyd itself, which will include a tower with 2,600 rooms, another tower of 700 suites, a 140,000 square-foot casino and 25 restaurants and bars. There will also be two entertainment theaters and a retail complex, plus substantial meeting and convention facilities.

Boyd said that it would fund the project with a combination of bank debt, public debt and cash on hand, but offered no specifics about its financing plans.

Fresenius for Europe only

As with Tuesday, which was 2006's first session, no new issues were priced on Wednesday.

One sell-sider suggested that market players are now purposefully "getting back to their seats," and added that everyone should be ready to go by next week, when a considerable load of primary market news is expected to materialize.

Meanwhile the market learned Wednesday that the Europe-only roadshow starts Tuesday for Fresenius Finance BV's €1 billion offering of senior notes in two parts.

The transaction will include seven-year bullets and 10-year non-call-five notes.

Credit Suisse First Boston has the physical books and Morgan Stanley is the joint bookrunner for the acquisition and debt refinancing deal from the Bad Homburg, Germany-based provider of kidney dialysis products and services.

Elsewhere the rumor mill tossed out some euro-grist on Wednesday, with one market source suggesting that Ineos Chemicals could soon show up with a mega-deal that could top €3 billion. The source asserted that the syndicate would be led by Merrill Lynch, Barclays and Morgan Stanley.

As Prospect News surveyed its market sources regarding this assertion, none thought that it was too far fetched, but all insisted that facts, at this juncture, are hard to come by.

Just gimme the coupon!

Meanwhile the above-quoted buy-side source said that although 2006 may not prove to be a year that produces double-digit returns in high-yield, "if you earn your coupon, that will make it a pretty good year."

The investor recollected that junk underwent a "fair amount" of spread widening in 2005, and added that if last year's widening can be limited in 2006, it would set up an agreeable high-yield scenario.

"If spreads stay flat the only risk is Treasuries," the investor said. "And if the Fed comes off of its aggressiveness Treasuries will be stable and growth will be stable.

This source added that companies are presently generating an impressive amount of free cash flow, and specified that 2005 free cash flow was the highest it has been in 45 years.

"As long as that keeps going you're not going to see a massive correction in high yield," the buy-sider said.

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