Freescale up on earnings numbers; GM, GMAC rally despite lower sales; VeraSun plucks a good crop

By Stephanie N. Rotondo

Portland, Ore., July 23 - Though a trader said the distressed market was "not as busy as I would like" on Wednesday, he also saw "a lot of volatility."

"Most stuff is better," he said. "The market is off the bottom."

"Momentum is getting better," added another source.

One of the better performers of the day was Freescale Semiconductor Inc. The chipmaker's bonds started the previous session on the slide, as investors expected Freescale earnings to reflect those of sector peer NXP Semiconductor. But as that was not the case, the debt started to strengthen, gaining as much as 4 points during Wednesday's session.

Meanwhile, General Motors Corp., along with its GMAC LLC lending arm, continued to see slight gains. GM's debt was at least a point better on the day - as was GMAC's - despite a drop in U.S. sales.

With more temperate weather in the Midwest, corn futures have begun to fall from their recent highs. That has meant good things for VeraSun Energy's bonds. The ethanol producer's paper took a hit when flooding threatened to destroy the region's corn crop but have since managed to recover.

Freescale bonds up on numbers

Freescale posted a narrower loss for the second quarter of 2008, and the company's bonds drove up in reaction.

One trader pegged the 7 1/8% notes due 2014 at 72.5 bid, 73.5, while another quoted the 10 1/8% notes due 2016 at 78.25 bid, 79.25 offered and the 9 1/8% notes due 2014 at 81.5 bid, 82.5 offered.

At another desk, a source deemed the 8 7/8% notes due 2014 up nearly 5 points to 85.25 bid.

Austin, Texas-based Freescale cut its loss by 36% to $184 million from $288 million the year before. Revenue increased 7% to $1.5 billion for the quarter.

Meanwhile, NXP's 9½% notes due 2015 continued to fall after the Dutch company reported disappointing numbers Tuesday. A trader said the debt had traded around 73 for most of the session but fell more than 7 points to 66.5 bid, 68 offered just before the close.

Moody's Investors Service dropped its rating on NXP to B2 from B1, citing the lackluster quarterly performance. The senior secured notes fell to B2 from Ba3 and senior unsecured notes slipped to Caa1 from B3. The ratings are under review for further possible downgrade.

GM, GMAC rally despite lower U.S. sales

General Motors' paper - which has rallied some in recent sessions - continued to do so Wednesday, despite the automaker's decline in U.S. sales.

A trader called the benchmark 8 3/8% notes due 2033 "maybe a point better" at 59 bid, 60 offered. He also saw GMAC's 7¾% notes due 2010 around 85 and its benchmark 8% notes due 2031 at 64.5 bid, 65.5 offered, also a point better.

Elsewhere, a source saw both GM and GMAC debt gain a deuce, with the former's 7 1/8% notes due 2013 at 65 bid and the latter's 6 7/8% notes due 2012 at 69 bid.

For the second quarter in a row, GM's global sales dropped, sinking 5% in the second quarter to 2.3 million vehicles sold worldwide.

Still, the company's losses in North America - which fell 20% to 963,929 vehicles - were partially offset by its sales in emerging markets, such as Asia and Russia.

With the economy under pressure, GM has already announced its plan to cut production, as well as jobs, in an effort to shore up its balance sheet. The Detroit-based car maker has been plagued with rumors of bankruptcy and liquidity problems. To date, the company has denied that it is in any sort of distress.

VeraSun plucks a good crop

Moderate weather has returned to the Midwest, just in time for the pollination season.

For now, the region's corn crops are doing well, recovering from the recent flooding. Also recovering is VeraSun's corporate debt.

VeraSun's bonds had been beat down - much like the corn - when flooding damage threatened to wipe out the supply of corn. But since the crop has been pronounced on the mend, and corn futures have therefore fallen, VeraSun's debt is plugging along.

"They continue to get stronger," a trader said, pegging the 9 3/8% notes due 2017 at 57.75 bid, 59 offered.

"There has been positive corn news lately," he said, attributing that to the firmness in the bonds. "Corn crops are plentiful again."

December corn futures fell 4.9% to an intraday low of $5.63 a bushel before rebounding some to end at $5.91 a bushel, down $1.75, or 0.3%.

On Tuesday, VeraSun announced it had started its 110 million gallon dry mill ethanol plant, which had been put off during the floods. Standard & Poor's said the new plant had no effect on its rating of the company, as the agency did not see any significant cash flow benefiting the company.

Broad market tidbits

SemGroup LP's bonds stayed in the 10 to 12 range, a trader said.

"It looks like they are just going to liquidate the whole parent," he said. He added that the "bank debt will probably be fine," though "the bonds are worth zero."

Primus Telecommunications Group Inc.'s 8% notes due 2014 were quoted at 31 bid, 33 offered.

"There was talk going around that the company might exchange the 8% notes, but apparently talks broke down and they couldn't get anything done," the trader said.

Elsewhere in the telecommunications sector, Level 3 Communications Inc.'s 9¼% notes due 2014 inched up 2.75 points to 92.5 bid. The company is scheduled to release its second-quarter financials Thursday morning.

Yankee Candle Co.'s notes "seemed to have a wild ride," a trader said. He pegged the 8½% notes due 2015 at 76.5 and the 9¾% notes due 2017 at 63.25 bid, 63.5 offered, "down a little bit."

R.H. Donnelley's 9 7/8% notes due 2013 closed a point stronger at 85.25 bid, 86.25 offered, a trader said. But the 8 7/8% notes due 2017 were unchanged at 50 bid, 52 offered.

Sector peer Idearc Inc. saw its 8% notes due 2016 end "a little lower" at 59.5 bid, 60.5 offered.

After getting beat up last week, Ply Gem Industries Inc.'s 11¾% notes due 2013 moved up to 90 bid, 91 offered, compared to 89.5 bid, 90.25 offered previously.

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