Thornburg gains ahead of numbers but no lift for peers; gaming, auto credits seen generally lower

By Paul Deckelman and Paul A. Harris

New York, Aug. 25 - Thornburg Mortgage Inc.'s bonds were seen up by several points Monday, along with its shares, ahead of the Santa Fe, N.M.-based mortgage lender's second-quarter numbers, which were released after the close on Monday, and the following conference call by company executives on Tuesday.

However, that did not help the bonds of such peer companies as Countrywide Financial Corp. and Residential Capital LLC.

One of the latter's ultimate corporate parents, General Motors Corp., was having its own troubles with lower levels for some of its own bonds and those of its GMAC LLC automotive financing unit.

Gaming names were again easier, led by Harrah's Entertainment Inc. and MGM Mirage, the latter in tandem with the fall in the company's shares.

Primary market activity meantime remained at a standstill.

Market indicators easier

The widely followed CDX index of junk bond performance was off 1/16 to 1/8 point, a trader said, quoting it at 92 3/8 bid, 92 5/8 offered. The KDP High Yield Daily Index meantime dipped by 3 basis points to end at 70.28, while its yield rose by 1 bp to 10.68%.

In the broader market, advancing issues trailed decliners by a narrow margin. Activity, represented by dollar volume, fell nearly 7% from the already-weak levels seen on Friday.

In that same vein, traders continued the litany of descriptions for the ultra-quiet session kicking off the unofficial last week of summer, or at least of August, ahead of the upcoming Labor Day holiday break. One declared that "today was a zero - like a Sunday."

Another likened trying to watch market action with "sitting here watching the grass grow."

Thornburg gains ahead of numbers

A trader saw Thornburg Mortgage's 8% notes due 2013 having pushed up to the 75 level in intraday trading before going out at 74 bid, 76 offered, still well up from 65 bid, 67 offered last week.

Another source saw the bonds at around 75 bid, up from around 69 previously. The bonds rose along with a surge in the company's shares ahead of its release Tuesday of second-quarter results and a conference call following the announcement of the numbers. Those New York Stock Exchange-traded shares - really an almost-worthless penny stock - gained 7 cents, or 21.21%, to end at 40 cents. Volume of 15.8 million shares was more than double the usual turnover.

On Monday night, well after the market had closed, Thornburg reported that in the second quarter it had net income before preferred stock dividends of $412.3 million, or 84 cents of diluted earnings per common share, versus net income of $83.4 million, or 66 cents per common share. Thornburg plans a 10:30 a.m. ET conference call.

While Thornburg firmed ahead of its results, the first trader saw little or no similar activity in the bonds of sector peers Countrywide Financial, whose 6¼% notes due 2016 were "where they've been" at 81 bid, 82 offered, while Residential Capital's 6½% notes due 2013 were unchanged at 25 bid, 26 offered.

MBIA Inc.'s 14% surplus notes due 2033 - high-grade rated but junk-traded - were down 1 point at 73 bid, 75 offered.

GM bonds seen mixed-to-lower

A trader saw General Motors's benchmark 8 3/8% bonds due 2033 unchanged at 49 bid, 51 offered, while its 49%-owned auto financing arm GMAC's 8% bonds due 2031 were likewise unchanged at 54 bid, 55 offered.

Another trader saw GM's benchmarks off ½ point at 48 bid, 49 offered, while domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 were off by ¾ point at 50.5 bid, 51.5 offered.

At another desk, however, a trader said that the GM bonds were up ½ point to 50 bid in round-lot trading, while the Ford bonds were down 1 point at 51.5 bid. He saw the GMAC bonds down ¾ point at 54.

Yet another trader called the GM bonds unchanged at 49 bid, 51 offered, saw the GMACs unchanged at 52 bid, 54 offered, and pegged the Fords up ½ point on "weak trading" at 50 bid, 52 offered.

But while those long bonds seemed to be holding their own, a trader said, "shorter paper was getting hit."

GM's 7.20% notes due 2011, for instance, were seen down more than 3 points on the session at 63.5, in very active dealings.

Among shorter-dated automotive finance issues, a market source saw GMAC's 6¾% notes due 2014 falling to 54 bid, down about 1¾ points. GMAC's 5.625% notes due next May lost more than a point to end just under 90.

Ford's 7.875% Ford Motor Credit Co. notes due 2010 were up nearly a point to just below 87.

Apart from GM and Ford, Visteon Corp.'s 7% notes due 2014 were down a point at 49 bid, in tandem with a 9% drop in its common stock.

Gaming issues a mixed bag

Among the gaming issues, a trader saw Majestic Star Casino LLC's 9½% notes due 2010 at 65.5 bid, up a point in round-lot trading from Friday's levels. He saw its 9¾% notes due 2011 down 3/8 point at 10.

He also saw MGM Mirage's 6% notes due 2009 at 98.25, up ¼ point, although he said that was to be expected from a very short issue.

However, he also saw MGM's 7½% notes due 2016 up a point at 81 bid, and its 6 5/8% notes due 2015 about ¼ point better, at 80.25, though its 8 3/8% notes due 2011 were off ¼ point at 90.75.

Another trader saw the MGM 71/2s close up ½ point at 80 bid, 82 offered, although he said that intraday they were up a point in round-lot dealings.

MGM's NYSE-traded shares - which had jumped some 20% on Friday on the news that Dubai World - MGM's 50-50 partner in its huge and ambitious City Center development project on the Las Vegas Strip - had gotten the OK from New Jersey gaming regulators to double its stake in MGM to 20% - were down $3.02, or 9.08%, at $30.23.

One factor was bearish commentary from Oppenheimer & Co. analyst David Katz, who warned that when City Center - a lavish complex of hotels, casinos, retail shops and residential properties - is finally built and opened, "we believe its likelihood of cannibalizing the other high end properties in the MGM portfolio, particularly Bellagio, appears high."

Elsewhere, a market source saw Harrah's Entertainment's 5 5/8% notes due 2015 down nearly a point at 38.5, while its 5¾% notes due 2017 were down more than 2 points, at about the same level.

Primary waiting for September

No primary market news surfaced on Monday, nor were sources anticipating hearing any for the remaining three-and-a-half sessions in the run-up to Labor Day weekend, the traditional summer-fall terminus in the capital markets.

A high-yield syndicate official in New York professed visibility on a post-Labor Day pipeline.

"There is nothing announced at the moment," the source said. "But subject to market conditions when people return in September I think you could see quite a few deals."

Sees bond, loan backlog at $60 billion

Prospect News asked this syndicate official whether the expected pipeline is likely to manifest itself in both new corporate deals and issuance related to the LBO backlog.

The source said that as far as hard news is concerned new corporate issuance would likely predominate.

"If the market is feeling good you could certainly see some of the underwriters unloading their positions, but that would probably end up being more of a private market transaction," the syndicate source said.

"The general consensus is that the backlog is down significantly from where it was earlier this year," the source added.

"There are numbers such as $60 billion [bond and bank] being thrown around out there, which would put the backlog at approximately one-fifth of what it was back in December and January."

15% to 16% cash

Earlier Monday an emerging markets syndicate source signed off on recent color that has gone around, maintaining that the cash positions of the dedicated emerging markets accounts are presently unusually high.

The EM sell-sider is hearing 15% to 16% cash.

The high yield syndicate official said that similar cash positions are also believed to presently be true of the high-yield accounts.

"We have a number of potential deals for September," the official said.

"We're just waiting to see how the market feels, and we're hoping those high cash levels can help improve the market a little, and open up some opportunity for new issues."

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