GMAC gets boost from U.S. investment; RHD paper jumps; Nortek ends mixed; Nortel notes notch up

By Stephanie N. Rotondo and Paul Deckelman

Portland, Ore., May 20 - GMAC LLC bonds ended Wednesday's session higher on reports that the government was considering making a second investment in the company.

The company's debt jumped anywhere from 3 to 7 points on the news. According to reports, a new U.S. investment would give the government a majority stake in the new bank holding company.

Meanwhile, R.H. Donnelley Corp. held two separate conference calls with its creditors on Wednesday to discuss a potential restructuring plan. There was no word on what came out of those calls, but the company's debt reacted by heading higher.

In earnings news, Nortek Inc. posted its quarterly results. Company management also said that it was looking at its options to meet upcoming debt obligations. Market players saw the notes end the day mixed.

Also, Nortel Networks Inc. reported its monthly operating numbers, which it is required to do while in bankruptcy. But it was unclear whether it was the numbers, or market sentiment, that moved the bonds up.

GMAC gets boost

GMAC paper headed higher Wednesday, following reports that the government might take a majority stake in the new bank.

A trader called the bonds 3 to 4 points better, pegging the 7¾ notes due 2010 - also the day's most active issue in the name - around 96 and the 6 7/8% notes due 2011 at 89.

Another source called the 6 7/8% notes due 2012 about 7 points higher on the day at 85 bid. Another saw the benchmark 8% notes due 2031 gaining more than 3 points to close at 73.

The Detroit News reported Wednesday that the U.S. Treasury Department was looking to invest another $7.5 billion in the company, on top of the $5 billion in preferred stock the Treasury already purchased.

Should the Treasury exercise its option on the previous investment, it would a have a nearly 35% stake in GMAC, plus voting rights - which were not included in the original investment. The potential ownership stake of the new investment is not clear.

"The only thing that would be particularly surprising about the Treasury's prospective capital infusion would be the timing [sooner than expected]," wrote Thomas Ferguson, a credit analyst at KDP Investment Advisors, in a note to clients. "We've long felt that the Treasury would continue to support GMAC, and that the company's unsecured bonds would benefit, as a result."

Elsewhere in the world of financials, a trader saw Capmark Financial Group Inc.'s 5 7/8% notes due 2012 at around 29.75 bid, "in good trading, up a couple of points," while its 6.3% notes due 2017 were "right around" 26.

"There wasn't as much activity in the longer ones," he said, with most of the action in a 25 to 26 context, "a couple of trades," The longer bonds "looked down a point, but the short stuff was a couple of points, and there was a lot more trading."

Also, General Growth Properties Inc.'s 7.20% notes due 2012 "right around 60, in small amounts," calling the bonds "up a little bit."

He saw no trades in the 5 3/8% notes due 2013.

"We saw these things quoted a lot," he said, "but you don't see many trades in them."

On the other hand, he saw GGP's Rouse Co. 8% notes that were to have matured on April 30 trading around 62.5 with "a lot of paper traded." One market source said at least $10 million of the Rouse bonds had changed hands by mid afternoon, but the trader insisted that "it could be a lot more than that - it just looks like it's $10 [million] but there are bigger trades put up" on the Trace system - which classifies all really large trades with the same $1 million-plus designation, "so you really don't know how much traded." However it's figured, though, he reiterated that "there was a lot of activity around 62-62.5, up a bit from where it was." He noted that those Rouse bonds had been in the upper 50s just the other day, suggesting that they were at least 4 to 5 points higher, "at least."

"That was the one [in the GGP structure] with all of the activity. The others had no [real] activity."

RHD paper jumps

R.H. Donnelley bonds gained as much as 5 points after the company said it was continuing restructuring talks with its lenders.

The most active of the company's issues were the 9 7/8% notes due 2013, according to a trader. He saw the paper moving up almost a point to around 23.25, while the 6 7/8% notes due 2013 closed a tad stronger at 7 3/8. But the 8½% notes due 2010 jumped 5 points during the session to around 62, he said.

Another trader called the 9 7/8% notes 1 to 1.5 points better at 23.5 bid, 24.25 offered. He also saw the 8½% notes gaining 5 points to the 62 area.

The Cary, N.C.-based phonebook publisher said in a press release that it was holding conference calls with its lenders, as well as with its ad hoc committee of bondholders, regarding a potential restructuring plan. The company gave no details about what the plan might include - some market sources have speculated a bankruptcy filing, like its rival Idearc Inc., was likely - and also noted that there was no guarantee a consensus could be reached.

Donnelley has until May 28 to get a plan under way or secure another forbearance agreement. The company has already missed two interest payments, one on April 15 and one on May 15.

Nortek ends mixed

Nortek debt closed mixed after the company released its quarterly earnings and said its parent company, NTK Holdings, was looking at options regarding its upcoming 2010 maturities.

A market source saw the 8½% notes due 2014 - the junior issue - falling a point to 23 bid, while another called the notes down 1.5 points at 22 bid, 23 offered. The second source also saw the 10% senior notes due 2013 gaining 2 points to 61 bid, 63 offered.

For the quarter ending April 4, Providence, R.I.-based Nortek reported operating earnings of $14.6 million, compared with earnings of $540 million in 2008. Net sales declined to $439 million from $540 million.

"Nortek continues to manage its business well considering the meltdown in the new housing market, the financial crisis impact on refinancings and foreclosures on existing homes and the reduced level of renovation and remodeling spending," said Richard L. Bready, chairman and chief executive officer, in a press release. "Nortek continues to focus on cost-reduction initiatives, including reductions in headcount and discretionary spending.

"We expect these difficult new housing market conditions will continue throughout 2009 until foreclosures work their way through the system and housing prices stabilize," he continued. "Furthermore, consumer spending on home remodeling and repair expenditures will not improve substantially until consumer confidence increases and consumers reinvest in their homes."

Also, during a conference call to discuss the results, Bready said the parent company plans to explore its options regarding its debt obligations in 2010, though he gave no indication of what those options might be. The company has obligations of about $162.3 million coming due that year.

"Balance sheet management is an extremely important priority for all of our businesses so we can maximize our cash flow from operating activities," Bready said during the call.

Nortel notes notch up

Nortel Networks' debt closed "up half a point to three-quarters across the board," a trader said. He attributed the rise to "market sentiment."

The trader quoted the 10 1/8% notes due 2013 at 28 bid, 28.5 offered.

The trader added that all of the notes were in that range. "The floaters trade a touch higher and the 10¾% [notes due 2016] a touch lower," he said.

Nortel posted a $151 million operating loss for the month of March on Wednesday. Revenues came to $477 million. Net loss for the month was $3.99 billion.

Those figures compare with a loss of $138 million on revenues of $318 million for the period between Jan. 14 and Feb. 28. Net loss during that time was $103 million.

Nortel Networks is a Brampton, Ont.-based manufacturer and supplier of telecommunications networking equipment.

Broad market firms

Among other names in distressed land, a trader saw continued upside in Pilgrim's Pride Inc., which had firmed smartly on Tuesday in response to better monthly operating numbers for April.

He saw the bankrupt company's 7 5/8% notes due 2015 "up a couple of points" at 86.5 bid, 87 offered, "so I guess it's up a little more" from Tuesday. "It's still feeling good, up a little higher."

He saw the 8 3/8% notes due 2017 at 73 bid, 75 offered, up from Tuesday's levels around 71.

At another desk, a trader pegged Pilgrim's 7 5/8s at 86.5 bid, which he called up about 3 points on the day, with $9 million traded, while its 8 3/8s moved up to 74 from 72 5/8 before, on volume of $6 million.

Bankrupt Chemtura Corp.'s 6 7/8% notes due 2016 moved up to 64.375 bid from 61 on Tuesday, with $11 million changing hands, a trader said.

Elsewhere, the trader quoted Rite Aid Corp.'s 9½% notes due 2017 as firming to 62.25 bid from 60.75 on Tuesday, with $9 million traded.

And, he saw athletic apparel maker Quiksilver Inc.'s 6 7/8% notes due 2014 firming to a round-lot level of 59.75 from 56 previously, on $15 million traded.

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