GM hangs in as other autos shift to reverse; Chiquita off on volume data

By Paul Deckelman

New York, June 13 - Bonds of General Motors Corp. were seen "hanging in there" Tuesday, in the words of one trader, with most of the Detroit auto giant's issues pretty much unchanged, or maybe even up a little - while the rest of the automotive sector, including GM's bankrupt former subsidiary, Delphi Corp., were bumping along in the breakdown lane and ending lower, their recent strength dissipated.

Most of the rest of the high-yield market was likewise traveling on the downside, taking its cue from the equity market, which continued to head downward amid investor uncertainty over the impact of the latest inflation data - the bellwether Dow Jones Industrial Average lost another 86 points, surrendering the last vestiges of whatever gains it had notched so far this year.

Back in the junk bond pits, Chiquita Brands International Inc.'s notes were lower as the Cincinnati-based banana importer reported that sales volume fell in its important European and North American markets from year-earlier levels. That in turn also dragged the bonds of Chiquita sector peer Dole Food Co., Inc. lower.

In the distressed-bond sector, asbestos-related issues continued their recent retreat, led by Owens Corning, the bankrupt Toledo, Ohio-based insulation maker, which had led the sector up strongly not very long ago - but which is now leading it just as steeply back down. Bonds of sector peers Armstrong World Industries Inc. and Federal-Mogul Corp. were also lower.

Primary market activity fell to a near standstill, traders in that area said, with not even a stray new deal seen breaking the monotony.

Back in the secondary market, a trader said that the recently issued 10¾% notes due 2016 of HealthSouth Corp. were lower, in line with the market's general weakness. He saw the Birmingham, Ala.-based outpatient surgery, rehabilitation and diagnostic clinic operator's bonds - which had priced at 98.505 on Friday and then moved slightly higher than that in Monday's dealings to 98.75 -retreating to 97.5 bid, 97.875 offered on Tuesday.

Among the well-established issues, GM's benchmark 8 3/8% notes due 2033 were seen by a trader to be "still firm" at 77 bid, 78 offered, even as the bonds of other automotive-linked names were lower. GM, he said, "didn't see much movement."

A market source at another desk actually saw those bonds a bit easier at 77.125, down from 77.5 - but said most of the company's other bonds - relatively less traded than the 8 3/8s - seemed better. GM's 8.80% notes due 2021 advanced to 79 bid from 77.875 previously, its 8¼% notes due 2023 rose a point to 77.75 bid, while its 8.10% notes due 2024 were two point better at 74.25, and its 6¾% notes due 2028 gained 1½ points to 72.5.

Yet another market source saw GM's 7 1/8% notes due 2013 down half a point at 81, while the 8 3/8s were also off half a point at 76.75 bid, 77.25 offered. He saw the 8% notes due 2031 of GM's financial unit, General Motors Acceptance Corp., off ¼ point at 94.75 bid, 95.25 offered.

Those GM bonds had moved strongly higher in the previous several sessions in apparent reaction to the news announced Friday that former unit Delphi, a bankrupt Troy, Mich.-based automotive parts supplier, had reached agreement with the United Auto Workers union and with GM on an expanded buyout package for all its 22,000 UAW-represented hourly employees, and was in talks on similar agreements with its other unions, representing about 11,000 more Delphi employees. Delphi hopes to get as many employees as possible to take the lump -sum payments and retire, leaving the company with the ability to replace them with much lower-paid non-union help, as it tries to slash its labor costs and restructure in Chapter 11.

GM - which has agreed to foot much of the bill for its problem child's buyout - is anxious to keep the peace, however shaky, between Delphi and its union, in order to avoid a potentially disastrous strike by Delphi's union members, which could play havoc with GM's production schedules just at the time when the automaker is trying to regain its financial health with the help of new models that it hopes will attract consumers.

Noting that GM held its own while other bonds in the sector were lower, a trader observed that "just trying to stay in one place is frequently the most difficult thing of all." Sometimes, he continued "the status quo looks pretty damn good. You could see this meltdown in a lot of these markets here. We've been around long enough, and we've seen this movie before - but that doesn't make it any less scary every time you see it."

Delphi lower

The trader saw Delphi's 6.55% notes slated to come due on Thursday at 84.5 bid, 85.5 offered, which he described as down 1½ points on the session - but saw its 7 1/8% notes due 2029 at 79.5 bid, 80.5 offered, "unchanged - so go figure."

At another desk, the latter bonds were seen down two points at 80 bid, while the 6.55s were off a point at 85. Delphi's 6½% notes due 2009 were at 85.125, down almost a point, and its 6½% notes due 2013 were the big losers, dropping three full points on the session to 79.25.

Other auto names weak

The trader meantime saw most other automotive names also in retreat, with GM rival Ford Motor Co.'s 7.45% notes due 2031 at 72.5 bid, 73 offered, off half a point, while the company's Ford Motor Credit Co. financial unit's 7% notes due 2013 were unchanged at 87 bid, 87.5 offered.

Among the other parts suppliers, he said, former Ford unit Visteon Corp.'s 8¼% notes due 2010 dipped to 92.5 bid, 93.5 offered, while the Van Buren Township, Mich.-based components supplier's 7% notes due 2014 ended at 81.5 bid, 82.25 offered, each down a full point.

He saw bankrupt Toledo, Ohio-based parts maker Dana Corp.'s 6½% notes due 2008 and its 5.85% notes due 2015 each down two points on the session, at 87 bid, 88 offered and 76 bid, 77 offered, respectively, although Dana's 7% notes due 2028 were unchanged at 78 bid, 79 offered. Bankrupt Novi, Mich.-based automotive frame maker Tower Automotive Inc.'s 12% notes due 2013 were at 70 bid, 72 offered, a full three-point loss.

Back among the non-bankrupt auto supplier names, he said, Rochester Hills, Mich.-based parts maker Dura Operating Corp.'s 8 5/8% notes due 2011 were down 1½ points at 84.25 bid, 85.25 offered, while the company's 9% notes due 2009 went to 55 bid, 57 offered, "down only half a point - why, I don't know. The selling was concentrated in the 8 5/8s."

Chiquita sinks on sales data

Apart from the auto names, another trader said, bonds were down across a wide range of sectors. He saw Chiquita's 7½% notes down two points at 83.75 bid, 84.75 offered after the company announced that volume of its European sales fell 2% in the April through May period from the same period a year ago - and slid 11% in North America, due primarily to the continuing disruptive impact of fourth-quarter 2005 storms, including Tropical Storm Gamma and Hurricane Stan, on sourcing and logistics. While average prices were up 10% in North America over the past two months after the signing of a new agreement, this was offset by a 10% fall in prices to its European customers.

With Chiquita lower, Dole's 8¾% notes due 2013 were off two points, the trader said, at 93.5 bid, 94.5 offered.

Another trader also saw the two produce rivals' bonds down, estimating Chiquita's 8 7/8% notes dropping to offered levels at 89.5, with no bids seen, from 90.15 bid, 91 offered on Monday. He saw Dole's bonds declining in sector sympathy, with the 83/4s down 1½ points to 94 bid, 94.5 offered, while its 8 7/8% notes were offered at 97, down from prior levels at 97.5 bid, 98 offered.

Also among food producer names, the first trader said, was Smithfield Foods Corp.'s 7% notes were a point lower at 97.5 bid, 98.5 offered.

Sea Containers lower

He saw Sea Containers Ltd.'s 10¾% notes slated to come due on Oct. 15 down two points on the session at 95 bid, 97 offered, a day after the Bermuda-based maritime operator announced that it had sold its Baltic ferry business - though for less money than many in the market had been expecting - and had also discussed potential covenant and bond indenture problems as its liquidity remained under pressure.

Another trader said that while Sea Container's bonds had gyrated around on Monday but ended not much changed, as investors tried to figure out the total meaning of its lengthy press release, "they definitely went down" on Tuesday, with the 103/4s at 95-96, the 10½% notes due 2012 at 94.5 bid, 95.5 offered, and its 7 5/8% notes due 2008 at around 93, each down several points on the day.

"There was a lot of doubt and uncertainty" on Monday, "but they digested it [Tuesday] and took the bonds down," he said.

Junk sinks but firmer than stocks

Among other names, the first trader saw Premiere Parks' 8 7/8% notes at 97.5 bid, 98.5 offered, down a point, while Toys 'R' Us' 7 5/8% notes were off a point at 82.5 bid, 83.5 offered. Theater operator Imax Corp.'s 9 5/8% bonds were off a point at 102.75 bid, 103.75 offered.

"The only thing that looks positive, from what I could see," he said, "was we didn't have paper dropping five or 10 points, getting creamed in a crazy freefall. It would go up early in the day, then weakened up, then buyers came in and probably covered up some shorts."

He said bad as the drop in the equity markets was, "they held in, compared with other markets across the globe, down 2%, down 3%, down 4%" while even the 85-point drop in the Dow was "down 0.6%. In that respect, it wasn't crazy, and the [Treasury] bond market held in there. It was definitely heavy [in junk], no one should tell you different, but the market gave up [only] a little ground, and stayed the course. You didn't open up 84-6 and close 78-80."

Asbestos issues down again

But one set of names that did, in fact, show that kind of sizable loss was the asbestos names, which have been steadily falling for some two weeks now on a combination of profit-taking off hefty earlier gains, plus investor angst over whether Congress will ever in fact pass a bill setting up a proposed $140 billion industry- and insurance-funded claims mechanism to settle the asbestos-related medical lawsuits that have driven companies like Owens Corning, bankrupt Lancaster, Pa.-based floorcovering maker Armstrong and bankrupt Southfield, Mich.-based automotive parts maker Federal-Mogul into Chapter 11.

On Tuesday, the carnage continued, with Owens Corning's flagship 7½% notes due 2018 plunging to 87.125 bid from prior levels around 95.75, a market source said, and its 7% notes due 2009 dropping a point to 93.5. At their peak levels in late May, after the company announced an agreement with its asbestos claimants and other creditor groups on the shape of a reorganization plan, those notes were trading above 120 bid. Its 7.70% notes due 2008, which just recently were at 105, finished down a number of points Tuesday at 86.75.

Armstrong's bonds fell to 68 bid, 70 offered from 71 bid, 73 offered Monday, another trader said, while Federal-Mogul's notes were a point easier at 58 bid, 60 offered.

Primary quiet

In the primary market, new-deal watchers had little to do, as nothing priced and no additional deals were even seen joining the forward calendar. FleetPride Corp. began a roadshow for its planned $150 million offering of eight-year senior notes, expected to price next week via Banc of America Secuities and Deutsche Banc Securities.

It joins a number of other deals that hit the road on Monday, including offerings for International Coal Group Inc., Baker & Taylor Inc. and Williams Partners LP.

A syndicate source said that a Monday afternoon investor call on the latter deal went "pretty much as expected," with pricing on the $150 million five-year bullet issue expected Thursday morning via joint bookrunning managers Citigroup and Lehman Brothers.

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