Smurfit-Stone notes gain on tax credit; autosphere ends mixed; MGM bonds better on CEO comments

By Stephanie N. Rotondo

Portland, Ore., May 12 - Smurfit-Stone Container Corp.'s bonds got a boost Tuesday on word that the company was receiving a hefty tax credit.

The company said in its 10-Q filed Monday that it was receiving the so-called black liquor tax credit in the amount of $183 million for the period ending April 30. It also expected to receive $45 million in credits per month until Dec. 31.

Meanwhile, Visteon Corp.'s debt structure dipped following the release of its quarterly financials. Automakers General Motors Corp. and Ford Motor Co. ended mixed on the day.

MGM Mirage moved higher during the session, continuing its recent run-up. The bonds gained as news reports indicated that a "coercive" debt swap was unlikely.

Smurfit-Stone gains on tax credit

Bankrupt cardboard maker Smurfit-Stone Containers' saw its bonds jump as much as 4 points on the day on news that the company was receiving a hefty tax credit, according to a trader.

The trader quoted the 8% notes due 2017 and the 8¼% notes due 2012 at 26.5 bid, 27 offered, up as much as 4 points.

Another source, however, deemed the issues up only 2 points at 25 bid, 26 offered. The source also saw the 7 3/8% notes due 2014 at 30 bid, 31 offered, also up a deuce.

On Monday, Smurfit released its quarterly report. In the report, the company said that it had received approval on its alternative fuel mixer application from the Internal Revenue Service. Smurfit then submitted a refund claim under the alternative fuel tax code totaling $183 million for the period between Jan. 1 and April 30. Additionally, the company said it expects to receive $45 million in credits for each month through Dec. 31, at which time the credit expires.

Smurfit expects to receive the first $183 million in the second quarter.

For the quarter, Smurfit reported a net loss of $214 million on $1.37 billion in net sales. That compared with a net loss of $13 million on net sales of $1.80 billion for the first quarter of 2008. The company attributed the wider loss to costs associated with its restructuring.

Smurfit-Stone Container is based in Chicago.

Autosphere ends mixed

Visteon's term loan was weaker following the company's release of first quarter results that showed a drop in sales and EBITDA, according to a trader.

The term loan was quoted at 25 bid, 27 offered, the trader said. Prior to the release of numbers, levels on the term loan were 27 bid, 29 offered. After the earnings came out very late in the day Monday, the levels dropped to the 25 bid, 27 context that continued to be seen on Tuesday, the trader added.

In the bonds, a market source pegged the 8¼% notes due 2010 half a point weaker at 11.5 bid, 12.5 offered.

For the first quarter, Visteon reported sales of $1.35 billion, down 53% from sales of $2.86 billion in the comparable period last year.

Adjusted EBITDA for the quarter was $22 million, compared with $166 million in the prior year.

And, net income for the quarter was $2 million, or $0.02 per share, compared with a net loss of $105 million, or $0.81 per share, in the first quarter of 2008.

The 2009 first quarter net income includes a non-cash gain of $95 million related to deconsolidation of Visteon UK Ltd. net liabilities.

In the first quarter, Visteon's free cash flow was a use of $300 million, compared with a use of $200 million for the same period in 2008.

As of March 31, cash balances totaled $767 million, of which $163 million was classified as restricted cash.

In addition, the company's total debt was $2.72 billion, which included $105 million drawn on its asset-based U.S. revolving credit facility and $43 million outstanding under its European receivables securitization facility.

Van Buren Township, Mich.-based Visteon also said on Monday that it continues to execute cost-reduction actions in response to the current market conditions beyond those associated with the recently completed three-year improvement plan.

These additional cost-reduction actions include previously announced global salaried and hourly work force reductions, shortened work weeks, temporary reductions in pay and elimination of 401(k) matching contributions and merit increases, and other measures.

"Our first-quarter results were significantly affected by the global reduction in vehicle production," said Donald J. Stebbins, chairman and chief executive officer, in a news release. "Visteon is taking the necessary steps to protect capital, maintain viable operations and position our global business for future success."

Elsewhere in the autosphere, General Motors' paper dropped slightly after it was reported late Monday that some of its executives had dumped the company's stock. Ford Motor was meanwhile better, despite a proposed equity offering that sent its stock reeling.

A trader quoted GM's 7 1/8% notes due 2013 at 5 bid, 5.5 offered and the benchmark 8 3/8% notes due 2033 at 5.5 bid, 6 offered.

The trader also called Ford's 7.45% notes due 2031 up 2 to 3 points at 56 bid, 57 offered.

From Friday to Monday, four of GM's group vice presidents, along with two of its vice chairman, sold almost 205,000 shares of GM stock at prices ranging from $1.45 to $1.61 per share.

Come Tuesday, a White House representative declined to comment on the sales.

"It's probably better that I resist the temptation to comment on individuals' personal stock holdings except to say that the president and the auto task force, again, want to ensure the continuation of General Motors and to do so in a way that puts it on that path that doesn't require continued government subsidies," White House spokesman Robert Gibbs said Tuesday, according to an Associated Press report.

Meanwhile, Ford announced a public offering of 300 million common shares, a move aimed at helping the automaker fund its health care trust for retirees.

However, the news sent the company's stock (NYSE: F) down $1.07, or 17.6%, to $5.01.

Still, Gimme Credit analyst Shelly Lombard sees a positive in the offering, which Alan Mulally, chief executive of Ford, pointed to as yet another example of the company's "fast and decisive action."

"The stock offering won't have much impact on bondholders," Lombard wrote in an afternoon comment. "But having hard cash rather than equity is probably preferable for the union. And any cash left over after the VEBA contribution will boost Ford's liquidity a bit."

Ford will hold its annual meeting of shareholders on Thursday.

MGM CEO: Debt swap unlikely

MGM Mirage's debt continued to edge up after the company's top executive said a "coercive" debt exchange seemed unlikely.

A trader said the short paper was "up again," the 8½% notes due 2010 at 86.25 and the 6% notes due 2009 at 93.5, a gain of 4 points and 1 point, respectively.

Another trader called the 7 5/8% notes due 2017 up a point at 69, while the 8½% notes were unchanged at 86.

The casino operator's debt has been on a winning streak of late, which led to Jim Murren, MGM's CEO, to tell Bloomberg News that "it's more likely that we're going to have a more constructive and more productive restructuring that will be to the benefit of the bond and equity holders, rather than the somewhat coercive ones."

Instead, Murren said the company is considering asset sales, though most likely at its properties outside of Las Vegas.

Among other names in the gaming arena, Harrah's Entertainment Inc.'s 10¾% notes due 2016 gained more than 4 points to end at 44.5 on no news, a trader said.

Broad market up and down

In the wider world of distressed debt, a trader said that General Growth Properties Inc.'s bonds "seemed active early on," with the shopping center real estate investment trust's 7.2% notes due 2012 ending at 56 bid, versus a 53 to 54 range previously. He said that among the various bonds in the capital structure, "the 7.2s were the ones that moved."

In the financial realm, American International Group Inc.'s unit American General Finance Corp.'s 6.9% notes due 2017 were trading "right around 50," a trader said. He said that was where the bonds had already been, but said there was "pretty decent volume" in it Tuesday.

MBIA Inc.'s 14% surplus notes due 2033 were seen trading in a 38 to 42 range and a trader said that they had "sort of been in that range" lately. He said that he "didn't notice" much upside on the news that the bond insurer had swing to a first-quarter profit versus a huge year-ago loss. He said that the bonds were "maybe up a point" on the day to end around 40 bid.

A trader saw Bowater Inc.'s bonds firm a little to 15 bid, 16 offered after the auction setting the value of credit-default swaps contracts protecting holders of the company's debt, from a 13 to 14 range before.

"We'll see more [Wednesday]," he said, as the market digests the results of the auction, which determined that the CDS contracts were worth 15% of the sum they insure - meaning that sellers of protection will have to pay out 85% of the value of the bonds they insured. Payments on the CDS contracts were triggered after Bowater parent AbitibiBowater Inc. filed for bankruptcy protection on April 16.

Sara Rosenberg and Paul Deckelman contributed to this article.

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