Ford bonds gain, loan slips; GM bonds steady, bank debt stronger; Freeport loses ground; retailers slide

By Stephanie N. Rotondo

Portland, Ore., March 5 - It was "mighty, mighty ugly" in the financial markets Thursday, a trader said, as the distressed bond arena weakened along with its equity counterpart.

"It's pretty much the end of the world as we know it," said one exhausted trader, who added that there was "decent volume" during the day.

"It's all for sale," he added.

Another trader used words like "crummy" and "sloppy" to describe the day. He also noted that bid wanted and liquidation lists were making the rounds again.

The single bright spot in the otherwise dismal financial storm was surprisingly Ford Motor Co. The automaker's bonds gained as much as 10 points on the day, while its term loan slipped some. The movements came on the back of the company's debt swap announcement made late Wednesday.

Also, General Motors Corp.'s bonds were unchanged while its term loan closed stronger. The company's auditors said that the future of the company was in jeopardy in a regulatory filing.

Meanwhile, ever-active Freeport-McMoRan Copper & Gold Inc.'s notes lost some of the ground gained in the previous session, as China's premier did not announce new stimulus measures, as was expected.

With retail sales numbers for February coming out, market players saw the sector mostly lower. Rite-Aid Corp., Neiman Marcus Group Inc. and Blockbuster Inc. all reported on Thursday and all saw their debt decline in response.

Ford, GM mixed

Ford Motor's longer paper gained as much as 10 points on the day after the company announced a debt exchange offer late Wednesday.

One trader said about $100 million of the company's 7.45% notes due 2031 traded, gaining 7 to 10 points to close at 26 bid, 29 offered.

"That was up a good hunk," he said. "And it was the single biggest trader in Ford land."

Another trader quoted the issue at 27 bid, 28 offered, calling that 8 to 9 points better. In the shorter paper, the trader saw the 9 7/8% notes due 2011 at 57, unchanged on the day, and the 7 3/8% notes due 2009 at 82, versus levels around 80 on Wednesday.

"So the short paper is up small and the long paper is up a lot," he said. "Ford has been doing better, they keep saying they are doing fine, they don't need any money."

Yet another trader placed the 7.45% notes at 27 bid, 28 offered, up from the high-teens, while another source called the 7% notes due 2013 linked to Ford Motor Credit a point higher at 49 bid.

However, Ford's term loan gave up some of the gains it posted late in the day on Wednesday following the announcement of a proposed restructuring, according to a trader.

The term loan was quoted at 33 bid, 34 offered, down from the previous day's close of 35 bid, 36 offered, the trader said. Prior to the restructuring news, which was as late as around 4:30 p.m. ET on Wednesday, the term loan was being quoted at 29 bid, 33 offered.

Ford said late Wednesday that it plans to restructure its debt through tender and conversion offers that would result in a significant reduction in its debt obligations and annual interest expense.

One aspect of the plan is the commencement of a $500 million cash tender offer for the company's senior secured term loan debt, of which $6.9 billion is outstanding.

Ford's term loan tender offer is being done as a "Dutch auction" where lenders are being invited to submit bids to sell their term debt within a price range of 38 to 47.

If the aggregate purchase price for term loan debt tendered exceeds $500 million, Ford will purchase at the clearing price all loans tendered at a price below the clearing price and purchase loans tendered at the clearing price on a pro-rated basis.

In addition, the company is doing a $1.3 billion cash tender offer for its unsecured non-convertible debt securities, of which approximately $8.9 billion is outstanding, and a conversion offer relating to its approximately $4.88 billion 4.25% senior convertible notes due Dec. 15, 2036.

Still, Dearborn, Mich.-based Ford may not be out of the woods just yet. Some market players, according to a Bloomberg report, believe that basis traders could still force the company into bankruptcy.

And speaking of bankruptcy, General Motors' debt structure was mixed as the company's auditors questioned the automaker's viability.

One trader said the company's bonds remained in the 13 to 15 range across the board. Another trader agreed with that level.

GM's term loan, however, was stronger as a waiver was received from bank lenders regarding the "going concern" opinion that was present in the company's 10-K filed with the Securities and Exchange Commission on Thursday.

The term loan was quoted at 42 bid, 44 offered, up from 38 bid, 40 offered on Wednesday, the trader said.

Without the waiver, the company's credit facility debt would have been callable by the lenders as a result of the auditors report.

In the filing, General Motors said that its independent public accounting firm issued the already expected opinion that recurring losses from operations, stockholders' deficit and inability to generate sufficient cash flow raise substantial doubt about the company's ability to continue as a going concern.

General Motors continued to say that its future is dependant on the successful enactment of its viability plan that was presented to the government, and if this viability plan does not go through it may be forced to file for bankruptcy protection.

On Dec. 31, the company entered into a loan agreement with the U.S. Department of Treasury for funding of $13.4 billion, payable in three tranches. The initial installment of $4 billion was provided on Dec. 31, followed by subsequent installments of $5.4 billion on Jan. 21 and $4 billion on Feb. 17.

In the viability plan filed with the Treasury on Feb. 17, General Motors included a request for additional government funding, as well as support from other governments outside of the United States.

The company said that it requires this additional funding in 2009 to continue operations until global automotive sales recover and its restructuring actions generate benefits.

General Motors is a Detroit-based automaker.

Freeport slips

Freeport-McMoRan's bonds were deemed unchanged to lower as China's premier failed to announce new stimulus measures, as was expected on Wednesday.

A trader said about $50 million of the 8 3/8% notes due 2017 traded at 83.5. He called that essentially unchanged, as it was "within a point of where it was" previously.

Another trader called the issue down a couple points at 83 bid, 84 offered, from levels around 85.5 on Wednesday.

The market had been expecting China to announce new measures it would take to revive its economy, the third largest in the world. Premier Wen Jiabao did say that the country expects to see 8% growth over the year and, as such, an increase in government spending was not necessary.

Freeport is a Phoenix-based mining company.

Retailers slump

February retail sales numbers have begun to appear and, as expected, the news is not good.

A trader said Rite Aid's 10 3/8% notes due 2016 were a couple points weaker at 57 bid, 58 offered on the back of its same-store numbers. Neiman Marcus' 10 3/8% notes due 2015 were also down at 33 bid, 34 offered.

"They had been getting hit before the numbers," the trader said. "But the numbers were pretty crappy" sending the debt down another couple points.

The trader also saw Blockbuster's 9% notes due 2012 slip to 39 bid, 40 offered.

At another desk, a source called Neiman's 10 3/8% notes nearly 2 points weaker at 33.5 bid.

For the five weeks ending Feb. 28, Rite Aid saw its same-store numbers fall 0.9%. The company attributed the declines to the economy, along with a weak cold and flu season.

Also, for the fourth quarter, Rite Aid showed a 1.9% decline in revenue, which fell to $6.68 billion from $6.81 billion the year before.

Over at Neiman Marcus, the Dallas-based retailer's four-week reporting period ended with a 24.2% drop in same store sales. Revenue declined 1.1% for the period.

But Blockbuster showed a 4.4% increase in same store sales. That bit of good news came after the company denied bankruptcy rumors earlier this week. The chatter had begun after the company reportedly hired Kirkland & Ellis, known bankruptcy advisors.

Blockbuster will report fourth-quarter results on March 19.

Broad market mixed

Nova Chemicals Corp.'s 7.4% notes coming due on April 1 were "up and down" 98.5, a trader said, with about $25 million changing hands.

MGM Mirage's debt, which had traded down for the last several sessions, moved back up, traders reported.

One trader placed the 6 3/8% notes due 2012 at 34 and the 6% notes due 2009 at 47 bid, 48 offered.

Another trader said that the bonds were "coming off the bottom," with the senior paper trading at 30 bid, 32 offered.

Capmark Financial Group Inc.'s 5 7/8% notes due 2012 closed unchanged at 16 bid, 17 offered.

AES Corp.'s 8% notes due 2017 fell another 5 points, a trader said, to 73 from 78. He trader added that the issue had been around 85 late last week.

Sara Rosenberg contributed to this article.

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