GM bank debt, bonds, rise on earnings; auto parts sector follows along

By Paul Deckelman and Sara Rosenberg

New York, July 26 - General Motors Corp.'s positive second quarter financials gave the auto sector as a whole a noticeable boost, with both the bonds and the bank debt of the troubled sector following the Detroit giant higher Wednesday.

In the bank debt market, not only did GM's loan rise in trading, but so did the paper of such names as Federal-Mogul Corp., Lear Corp. and Collins & Aikman Corp. as well.

With auto sector bellwether GM better, bonds of other automotive names followed it right up, including GM's own financing arm, General Motors Acceptance Corp., its major rival, Ford Motor Co., and Ford's financing unit, Ford Motor Credit Co., and even the bonds of bankrupt former GM parts subsidiary Delphi Corp., which remains inextricably linked to its one-time corporate parent because of its extensive sales to GM, its single largest customer, and because GM is helping Delphi out of its current financial jam by agreeing to front Delphi most of the money the cash-strapped latter company needs to proceed with its program to cut its bloated workforce by offering buyouts to thousands of unionized hourly workers.

Detroit-based GM, the world's largest carmaker, saw its newly obtained credit facility rise to 95 bid, 95.5 offered, up ¼ point from Tuesday's levels of 94.75 bid, 95.25 offered, according to a trader in that market.

Over on the bond side of the ledger, "it was GM day," a trader said, quoting the carmaker's 8 3/8% notes due 2033 at 83 bid, 83.5 offered, up 3 points on the day, and 6.85% notes due 2008 a point higher at 84.5 bid, 85.5 offered.

Another trader saw the 8 3/8s up 1½ points at 82.75 bid, 83.25 offered, noting "they opened up there" in response to the quarterly results "and then they just sat there."

A market source at another shop quoted GM's 7 1/8% notes due 2013 up a point at 86 bid.

GM announced that for the second quarter, it had a net loss of $3.2 billion ($5.62 per share), although that included a total of $4.3 billion ($7.66 per share) in special items that reflected a previously announced $3.7 billion after-tax charge related to the successful accelerated attrition program, in which 34,400 hourly employees participated. By comparison, for the second quarter of 2005, the company reported a net loss of $987 million ($1.75 per share).

However, GM bulls pointed to the company's adjusted net income for the quarter, excluding special items, which was $1.2 billion ($2.03 per share) on record revenue of $54.4 billion. That was a solid improvement of $1.4 billion from the year-ago adjusted loss of $231 million (41 cents per share) on revenue of $48.5 billion.

GM also said that its adjusted operating cash flow for the quarter was $700 million - a more than $2 billion improvement compared to the second quarter of 2005.

GM lifts other auto names

Those better numbers from GM helped to tow the bank debt of other sector names higher as well, traders in that market said.

Southfield, Mich.-based auto parts manufacturer Federal-Mogul saw its term loan A jump to 97.75 bid, 98.25 offered, up ½ point from previous levels, one said.

Federal-Mogul's cross-town neighbor, Lear Corp., a supplier of automotive interior systems and components, saw its revolver strengthen to 94.75 bid, 95.75 offered, up ½ point from previous levels, the trader continued.

And the recently trounced bank debt of Troy, Mich.-based automotive interior components maker Collins & Aikman even got in on GM's good news, moving up to 86 bid, 87 offered from 85 bid, 86 offered, the trader added.

A junk bond trader saw Collins & Aikman's 10¾% senior notes due 2011 firm as much as 3 points on the session to 19 bid, 21 offered. Its near-worthless 12 7/8% subordinated notes due 2012 continued to languish at levels below 3 cents on the dollar.

A junk trader saw the bonds of another bankrupt Troy-based components company - former GM unit Delphi's 6.55% notes due 2009 at 82.25 bid, 83.25 offered, up 1¼ point from Tuesday's levels.

A second trader saw Delphi's 7 1/8% notes due 2029 up 3/8 point at 77.5 bid, 78 offered, and saw GM rival Ford's 7.45% notes due 2031 also a 3/8 point gainer, at 74.5 bid, 75 offered. Ford Credit's 7% notes due 2013 were ¾ point better at 88.75 bid, 89.75 offered. He saw GMAC's 8% notes due 2031 up ¼ point at 98.5 bid, 99.

The first trader said that "the whole [automotive] sector felt good," and noted that it had "been moving up the last day or two," in anticipation of GM's quarterly report.

Another name seen moving up was bankrupt Toledo, Ohio-based automotive components maker Dana Corp., with a trader in distressed notes calling its bonds up 2 points across the board at 84 bid, 86 offered.

He also saw the 12% bonds due 2013 of bankrupt Novi, Mich.-based vehicle frames maker Tower Automotive Inc. a point better at 57 bid, 59 offered.

A trader saw Lear's 8.11% notes due 2009 at 97.5 bid, 98.5 offered, up a point, while Rochester Hills, Mich.-based Dura Automotive's 9% notes due 2009 were 2 points better at 50 bid, 51 offered.

Outside the automotive arena, the distressed-bond trader did not see much activity in either Calpine Corp. or Adelphia Communications Corp., both of which have been moving steadily upward over the past several sessions.

However, he did see Dothan, Ala.-based video rental chain operator Movie Gallery Inc.'s 11% notes due 2012 up a point at 77 bid, 79 offered.

Asbestos names lower

And he saw bonds of such asbestos-challenged companies as Owens Corning and Armstrong World Industries Inc. "down a couple of points," although he saw no fresh news out on the sector.

Owens Corning's 7½% notes due 2018 were down 2 or 3 points on the session to 69 bid, 71 offered, while Armstrong's notes likewise lost 2 points, to 67 bid, 69 offered.

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