Cash climbs on economic optimism; LCDX better; Freescale shrugs off downgrade, heads up

By Sara Rosenberg

New York, Jan. 28 - The cash market in general had a strong day on Wednesday, with names like Texas Competitive Electric Holdings, Calpine Corp., Ford Motor Co., Charter Communications Inc. and VNU Group BV all higher as people were hopeful about potential plans to help the economy.

In other news, LCDX 10 posted some gains and Freescale Semiconductor Inc.'s term loan B moved higher with the rest of the market even though the company's ratings were downgraded by Moody's Investors Service.

Cash market rises

Overall, the cash market was up by about one to two points during the trading session, with one of the biggest possible impetuses behind the move being the talk about the creation of a "bad bank," according to traders.

For example, Texas Competitive, a Dallas-based energy company, saw its term loan B debt quoted at 69 bid, 70 offered, up from 67½ bid, 68½ offered, one trader said.

Calpine, a San Jose, Calif.-based energy company, saw its term loan quoted at 77½ bid, 78½ offered, up from 75 bid, 76 offered, the trader added.

Ford, a Dearborn, Mich.-based automotive company, saw its term loan quoted at 37 bid, 38 offered, up from Tuesday's levels of 34½ bud, 35½ offered and Wednesday's morning levels of 35½ bid, 36½ offered, a second trader remarked.

Charter, a St. Louis-based provider of video services, high-speed internet services and telephone services, saw its term loan B quoted at 77 bid, 78 offered, up from 76 bid, 77 offered, the second trader continued.

And, VNU, a Haarlem, Netherlands-based information and media company, saw its term loan B quoted at 78 bid, 79 offered, up from 76 bid, 78 offered on Wednesday morning, the second trader added.

Bad bank chatter spurring the rally

Traders explained that the strength seen in the secondary market on Wednesday was likely a result of talk regarding government plans to help gets rid of bad assets at the banks.

"Biggest thing people are pointing to today is the idea of the creation of a bad bank by the FDIC to get rid of some of these toxic assets. All these [loan] names are up. Definitely across the board," one trader remarked.

Another factor that could be causing the rise in cash levels is President Barack Obama's $800 billion-plus economic stimulus plan.

"Maybe people think this stimulus plan will magically fix the economy. People are optimistic. Seems to be everything is pretty well bid," a second trader added.

LCDX trades up

Also moving higher during market hours was LCDX 10, as cash, equities, and pretty much everything else was up, according to a trader.

The index was quoted at 77.75 bid, 78.25 offered, up from Tuesday's levels of 76 bid, 76.50 offered, the trader said.

Nasdaq closed up 53.44 points, or 3.55%, Dow Jones Industrial Average closed up 200.72 points, or 2.46%, S&P 500 closed up 28.38 points, or 3.36%, and NYSE closed up 186.02 points, or 3.50%.

Freescale better despite downgrade

Freescale Semiconductor's term loan B gained some ground on Wednesday as investors chose not to focus on the company's ratings downgrade, but rather push it higher with the overall secondary market, according to a trader.

The term loan B was quoted at 51 bid, 53 offered, up from Tuesday's levels of 50 bid, 52 offered, the trader said.

Late Tuesday, Moody's announced that it downgraded Freescale's corporate family rating to Caa1 from B1 and credit facility to B1 from Ba1. The outlook remains negative.

The downgrade reflects prospects of continued materially weaker sales in the global automotive sector, an end market where Freescale has significant customer exposure, as well as reduced earnings contribution from a likely separation or downsizing of its cellular business, Moody's explained.

The rating agency went on to say that with Freescale's revenues expected to remain depressed through 2009, profitability will remain weak and free cash flow will be negative, placing additional stress on the company's liquidity.

Freescale is an Austin, Texas-based designer and manufacturer of embedded semiconductors for the transportation, networking and wireless markets.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.