Idearc bonds active as plan filed; GMAC ends mixed; GM, Ford loans stronger; broad market firms

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., May 18 - Idearc Inc.'s bonds dominated trading in the distressed hemisphere Monday, following the company's filing of its reorganization plan.

But some market players also noted that chatter of a potential sale was circulating, which could also account for the activity.

Meanwhile, GMAC LLC's shorter paper closed higher, while its longer issues faltered. The movement came after the company said on Friday that it was converting to a real bank, name change and all.

General Motors Corp. and Ford Motor Co. saw their bank debt holding in there, traders reported. Both companies saw their debt run up in the previous week, though it was not clear what had caused that action either.

Overall, traders characterized the session as everything from quiet to "generic." Some speculated that summer vacations were just beginning.

Idearc active as plan filed

Idearc's 8% notes due 2016 topped the day's most active list, traders reported, after the company filed its reorganization plan.

"Other than Idearc, not much stuff happened," said one trader, quoting the bonds at 1.5 bid, 1.75 offered. "It's one of the few distressed situations left."

The trader added that somewhere between $30 million and $40 million of the debt changed hands.

Another trader put the notes around 2, "give or take."

The second trader also noted that rumors have been circulating that the company is being sold.

Under the terms of the reorganization plan, Idearc's bank creditors would receive 95% of stock in the new reorganized company and all outstanding stock will be canceled.

Meanwhile, sector rival R.H. Donnelley Corp.'s bonds ended mixed after it was decided that the company's credit default swaps would be settled at auction.

A market source called the 8 7/8% notes due 2063 about 2 to 4 points weaker at 21 bid, 23 offered. Bu the 9 7/85 notes due 2013 and the 8% notes due 2013 linked to Dex Media were both 3 points stronger, the former at 21 bid, 23 offered and the latter at 15 bid, 16 offered.

Donnelley's CDS was triggered after the company missed a $55 million interest payment on April 15. Though the company has secured a forbearance on the payment - as well as that of a coupon that came due Friday - the CDS still needs to be paid, as the April 15 payment was not cured within the 30-day grace period.

Moody's Investors Service also is viewing the missed coupon as a default. As a result, the rating agency dropped Donnelley's probability-of-default rating to Ca/LD from Ca.

R.H. Donnelley is a Cary, N.C.-based phonebook publisher. Idearc is based in Dallas.

GMAC debt mixed

GMAC's short issues got a boost on news the company was converting to a bank holding company - complete with a name change - but its longer paper ended weaker.

A market source deemed the 6 7/8% notes due 2012 about 4 points better at 81 bid, while another saw the 6.9% notes due 2009 and the 6½% notes due 2010 gaining 1 to 1.5 points on the day. The notes closed at 98.5 bid, 99.5 offered and 81 bid, 82 offered, respectively.

GMAC's banking unit will relaunch as Ally Bank, the company said on Friday. The name dates back to the company's inception during World War I.

"We are launching a new brand with a new approach of treating customers with total transparency," said Al de Molina, GMAC's chief executive officer, in a press release published Friday. "Unlike other banks which depend on fees as a business model, we want to make money with customers, not off customers.

"Both current and new customers will benefit from our improved online banking experience, the avoidance of teaser tactics, true no-penalty CD products and rates among the best in the country for all of our savings products," de Molina added.

"The Ally brand is founded on three principles: Talking straight, doing what is right for the customer, and being obviously better than the competition," added Sanjay Gupta, chief marketing officer, in the statement. "It is a promise from our company to our customers. We believe that being direct and honest is the best way to build lasting customer relationships.

"Given the recent financial market turmoil, people are looking for a safe, honest and efficient place to save and grow their money. Ally Bank offers that place."

GM, Ford loans stronger

In related news, General Motors, Ford Motor and Chrysler Financial Services LLC were all fairly steady on Monday after experiencing big run-ups last week, according to traders.

General Motors, a Detroit-based automotive company, saw its term loan quoted by one trader at 69¼ bid, 70¼ offered, compared with 69½ bid, 71 offered on Friday, by a second trader at 68½ bid, 72½ offered, unchanged from Friday, and by a third trader at 70 bid, 71½ offered, versus 70 bid, 72 offered on Friday.

Ford, a Dearborn, Mich.-based automotive company, saw its term loan quoted by one trader at 65 bid, 66 offered, compared with previous levels of 65 bid, 67 offered, and by a second trader at 64½ bid, 67½ offered, unchanged on the day.

And, Chrysler Financial, a provider of financial services for vehicles, saw its first-lien term loan quoted by the first trader at 84¼ bid, 85¾ offered, basically unchanged on the day, and by another trader at 85 bid, 85 offered, flat from Friday.

According to one trader, the rally that General Motors, Ford and Chrysler Financial underwent last week "firmed up" on Monday, since levels didn't go back down.

The trader explained that after having something like a 10-point run-up, it's a good sign that the bank debt was able to stay in the same context as the higher levels that were reached at the end of last week.

"Stuff was really quiet today. Nothing was really active today. I don't know if people are already on vacation or wish they were," the trader added.

What caused the rally is not totally clear but some speculated that talk of a potential repayment of General Motors' bank debt might have been the impetus.

Rumor has it that last Thursday afternoon news leaked out that there was a lawyer call with some group of lenders to talk about what's going to happen to General Motors' term loan and the revolver if the company files for bankruptcy, and that one of the scenarios discussed on the call was that the government might take the term loan and revolver out at par.

One of the other traders told Prospect News on Monday that the next piece of news that everyone is waiting on for the auto sector is whether General Motors is going to file for bankruptcy in the next week and a half or so.

In April, the company launched offerings to exchange 225 shares of its common stock for $27 billion of its unsecured public notes.

If, prior to June 1, the company does not receive enough tenders of notes to consummate the exchange offers, it expects to seek relief under the U.S. Bankruptcy Code.

This relief may include seeking bankruptcy court approval for the sale of most or substantially all assets to a new operating company and a subsequent liquidation of the remaining assets, pursuing a plan of reorganization, or seeking another form of bankruptcy relief.

General Motors believes that if it pursues one of the alternatives, a sale would be the most likely, according to an S-4/A filed with the Securities and Exchange Commission last week.

Broad market firms

Traders saw the distressed bond market improving Monday, though trading was called "generic" and on the quiet side.

"This was really a sleeper," a trader said of the day's activity.

In the gaming sector, a trader said $10 million to $12 million of Harrah's Entertainment Inc.'s 10¾% notes due 2016 traded around 48. Another pegged the issue at 47.5 bid, 48 offered.

"Haven't seen them in the market leaders for awhile," a trader commented.

MGM Mirage's bonds were seen holding steady as Standard & Poor's upgraded the casino operator to CCC+ from CCC. A trader placed the 8 3/8% notes due 2011 at 75.5.

"That's kind of where it has been but they are holding up at those higher levels," he said.

Away from that, First Data Corp.'s 9 7/8% notes due 2015 regained some losses it incurred last week after posting "bad" numbers. A trader said the bonds closed around 64.5, up from 63 bid, 64 offered.

Elsewhere, a trader saw Continental Airlines Inc.'s 8¾% notes due 2011 trade at 65 bid, 66 offered.

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