Market strength both hurts, helps; MGM continues upward climb; Ford notes rise, GM bonds drop

By Stephanie N. Rotondo and Paul Deckelman

Portland, Ore., May 4 - The distressed debt market continued on its upward path Monday, though traders noted that there were few - if any - names that stood out.

Of the names that were topical, MGM Mirage's bonds gained some ground early on in the session. One trader speculated the movements were still a result of news released last week.

Ford Motor Co. and General Motors Corp. also remained in the news. Ford's bonds were seen continuing to climb after posting a 32% decline in April sales last week. GM, meanwhile, was seen mostly on the softer side, as the Obama Administration reportedly pushes the company closer to Chapter 11.

Market strength hurts, helps

Recent strength in the market has resulted in rallies across a number of sectors, but the problem remains to be one of the principle tenets of economics: supply and demand.

"The market is better, kind of across the board," a trader said Monday. However, "nothing really stands out."

Such has been the case in recent weeks. Certain topical names, like General Motors and MGM Mirage, gyrate along with news, but other names, such as Freeport-McMoRan Copper & Gold Inc. - a name that very often makes the top trading list, most likely due to the size of its issues - move without any prompting.

According to one trader, buyers are outweighing sellers, making it difficult to find paper to buy. And, once paper is found, the buyers might not always like what they hear.

"It's the same problem," the trader said. "People are scrounging around for paper and getting sticker shock when they find it."

Another issue facing traders is the lack of new names entering the market. And, of the names that are already in the market, traders - and perchance investors as well - are losing interest.

"It's more of the same," a trader said. "There is just not a lot of interesting stuff."

As such, traders continue to root for volatility. One source recently told Prospect News that he didn't care which direction an issue was trading, as long as there was volatility in the market.

But while renewed investor interest about distressed debt is deemed a positive, a lack of supply and increasing demand will only serve to push prices higher, thus resulting in the aforementioned "sticker shock."

MGM continues upward climb

MGM Mirage's bonds were "up a lot in the morning on the news of the last week," according to one market source. The source said he also heard a rumor of an equity financing deal but had not been able to confirm the buzz.

The trader called the 6 5/8% notes due 2015 up nearly 5 points at 59 bid, 60 offered, compared with levels around 54.5 on Friday. He deemed the 13% notes due 2013 "almost unchanged on the day" at 95.5 bid, 97 offered, down from an intra-day high of 98.5 bid, 99 offered.

"They're still moving up," he noted.

Another source placed the 6 5/8% notes at 57.5 bid.

Last week, MGM announced it had inked a new deal with its CityCenter joint venture partner, Dubai World. Under the terms of the deal, Dubai would repay MGM $135 million of funds MGM paid out to lenders and would also drop its breach of contract lawsuit. Furthermore, the new deal fully funds the $8.5 billion project located in the heart of the Las Vegas Strip.

Ford rises, GM drops

Among other topical names, Ford Motor's bonds continued to rise, traders reported.

A trader saw the 7.45% paper due 2031 up another point at 52 bid, 54 offered. However, another trader saw the bonds fall to a level of 52.5 bid from a round-lot level of 55 on Friday, although he said there were less than $1 million of the bonds traded.

He did, on the other hand, see Ford Motor Credit Co.'s 7 3/8% notes coming due on Oct. 28 firm to 97 bid, or a 14% yield to maturity, up half a point, on $7 million traded.

But at another desk, a market source marked the credit arm's bonds as mixed on the day. While the 7 7/8% notes due 2010 pushed up by more than 4 points on the day to end at 93.5 bid, its 7% notes due 2013 dropped 3 points, to close at 74, while its 12% notes due 2015 were down more than 2 points to the 86 level.

Last week, the Dearborn, Mich.-based carmaker announced its April sales figures, which showed a 32% decline. However, for the first time in more than a year, Ford beat out rival Toyota as the month's top car seller.

Elsewhere in the autosphere, GM's bonds were seen retreating, as a bankruptcy filing became more and more likely.

The Obama administration has reportedly favored the union side of things in a bondholder/union battle over who gets what in a GM restructuring. Bondholders have claimed unfair treatment in a recent debt swap that would give them about 1% of the total new equity in a reorganized company.

A trader saw the benchmark 8 3/8% bonds due 2033 fall by a point on the day to 8 bid, on $6 million traded, although he saw GM's 7.2% bonds due 2011 actually gain a point to end at 9.5 bid, though on only $2 million traded.

Another trader said the GM benchmarks were down a quarter of a point, to finish at 7.75 bid, 8.75 offered, while GM's 8¼% bonds due 2023 retreated by more than a point to close just under 7 bid.

One of the traders also saw GMAC LLC's bonds mixed, after the big run-up late last week on the news that the federal government will aid the auto-finance unit so that it can assume the role of lender to bankrupt Chrysler LLC's dealers and car buyers.

He saw GMAC's 8% bonds due 2031 firm to 64.5, a 2-point gain from 62.5 on Thursday, and up another 1.25 points from Thursday's finish at 61.25. Some $5 million of the bonds changed hands.

But he saw GMAC's 7¾% notes due 2010 go home at 92 bid, down from 94.5 on Friday, with $9 million changing hands.

Another market source saw the GMAC 7¾% notes due 2010 dip 3 points on the day to 91 bid.

Residential Capital LLC, a wholly owned GMAC subsidiary, rose for a second straight session Monday in line with its parent's mostly firmer levels. ResCap's 8 7/8% notes due 2015 were 2 points better at 44 bid.

Broad market gains

Among other distressed names, Freeport-McMoRan's 8¼% notes due 2015 and its 8 3/8% notes due 2017 made the "top of the leader board" yet again, according to a trader. He placed the 8¼% notes at 99.25bid, 99.75 offered and the 8 3/8% notes at 99.5 bid, par offered.

Charter Communications Inc.'s 10¼% notes due 2010 and 2013 moved up to around 92, a trader said. When asked why the debt moved, he dismissed the notion that positive numbers from Sprint Nextel Inc. had anything to do with it.

"I think it just has to do with everything rallying," he said.

Rite Aid Corp.'s bonds recouped some losses it gained on Friday. A source called the 8 5/8% notes due 2015 up nearly a deuce at 53.25 bid.

Another trader saw Rite Aid's 9½% notes due 2017 gain some 2.5 points on the day to end at 54.25 bid, on $15 million traded, while its 8 5/8% notes were up nearly 2 points at 53 bid.

Meanwhile, General Growth Properties Inc.'s 7.2% notes due 2012 issued by its Rouse Co. LP subsidiary gained more than 4 points to close at 49. A market source also saw Rouse's 5 3/8% notes due 2013 firm several points to just under 57 bid, on volume of more than $10 million, making it one of the busier bonds on the session.

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