Automakers up after Bush meeting, suppliers struggle; price talk emerges on Freescale deal

By Paul Deckelman and Paul A. Harris

New York, Nov. 14 - Bonds of Ford Motor Co. and General Motors Corp. strengthened Tuesday after the chief executives of those two carmakers, along with their counterpart from Chrysler Group, met with President Bush to lay out the woes faced by the domestic automobile industry - but not, they said, to ask for a bailout by Washington.

While the carmakers were better, bonds of some of their suppliers continued to struggle, notably Dura Automotive Systems Inc. and Remy International Inc.

However, Collins & Aikman Corp.'s badly battered bonds rose after the bankrupt Troy, Mich.-based auto interior components maker said that it would abandon plans to come out of bankruptcy as a standalone company and instead focus its efforts on selling the company, either whole or piecemeal.

Elsewhere, bonds of homebuilder Technical Olympic USA Inc. gyrated but ended higher on the day after it reported a dip into red ink during the third quarter - but told participants on a conference call that its potential exposure to the debt problems of its troubled joint venture were limited.

In the primary market, price talk emerged on Firestone Acquisition Corp.'s upcoming $5.95 billion behemoth of a bond deal, the proceeds of which will be used to finance the buyout of Freescale Semiconductor Inc.

Price talk also was heard on AmeriCast Technologies Inc.'s $100 million issue of eight-year notes.

Activity was relatively quiet in both the primary and the secondary markets, traders said, with many portfolio managers and other investment decision makers in Las Vegas for a well-attended Merrill Lynch investment conference.

GM, Ford take upside ride

A trader saw GM's benchmark 8 3/8% notes due 2033 at 91.25 bid, 91.75 offered, while arch-rival Ford's 7.45% notes due 2031 were at 80.25 bid, 80.75 offered, both up ¾ point on the session.

Another agreed that the carmakers' bonds were firming "on the long end," with the GM 8 3/8s at 91 bid, 92, and the Ford 7.45s at 80 bids, 81 offered, both up ½ point, although he called the movements "no big deal."

A market source at another desk meantime saw GM's 7¼% notes due 2013 at 92, up ¾ point, while Ford's 7% were about ¼ point higher, around 95.

The bonds got a jump start after the industry executives, including GM chief G. Richard "Rick" Wagoner and his Ford counterpart, the recently installed Alan Mulaly, met with the president at the White House to talk about the ditch into which the once-mighty U.S. auto industry has driven

Among the topics reportedly discussed were foreign exchange market conditions - the executives said a too-weak Japanese yen gave carmakers based in that country, such as Toyota, Honda and Nissan, as well as their luxury divisions, Lexus, Accura and Infiniti, an unfair advantage over the domestic producers - high health-care costs and rising prices for raw materials.

How much power the president actually has to affect such things is debatable - particularly in the wake of last week's elections, which took control of Congress away from his party. However, the sight of the Big Three's leaders at the White House has a certain symbolic value, which was not lost on the market. Besides the rise in bond prices, GM's stock rose, as did that of Chrysler parent DaimlerChrysler AG, although Ford's was lower.

The executives said they were not seeking a bailout from the government, even though the industry has wallowed in red ink, losing billions of dollars as the carmakers have lost market share to their import rivals.

Bush, for his part, expressed confidence that the automakers were "making the right decisions. That's good news for the American people, because the automobile manufacturers play such a significant part of our economy and a vital part of our employment base."

Dura, Remy in retreat

Dura Automotive's bonds, on the other hand, were driving on the downside, with a trader seeing the bankrupt Rochester Hills, Mich.-based automotive systems maker's 8 5/8% notes due 2012 falling as low as 22 bid before coming slightly off that low to end at 24 bid, 25 offered, down 2 points on the session. He saw Dura's 9% notes due 2009, which had already been trading at only 5½ cents on the dollar, dip further to 3 bid, 4 offered.

Another trader said the bonds "got hit a little" on the way to their 2 point loss at 24-25.

Dura's planned financing of its bankruptcy meanwhile came under fire as hedge funds that claim to own most of Dura's $225 million of second-lien debt filed objections to its financing arrangements on Monday with the U.S. Bankruptcy Court in Wilmington, Del., which is overseeing its restructuring.

They claimed that Dura's plan to borrow $300 million in debtor-in-possession financing and use $125 million of that to pay off the first-lien holders would jeopardize their rights.

The court is scheduled to hear arguments on the objections next Monday.

Remy is routed

Also driving hard to the downside was Remy International, whose bonds have already been getting drubbed over the past several sessions, following the Anderson, Ind. automotive electronics and electrical parts maker's disappointing earnings reports last week.

A trader saw Remy's 8 5/8% notes drop back to 77.5 bid, 79.5 offered, down from 81 bid, 83 offered on Monday.

He also saw Remy's subordinated 11% notes down a full 6 points to 30 bid, 32 offered, while its 9 3/8% notes were off 5 points at 27 bid, 29 offered.

Another trader saw the 9 3/8s down 3 points to 29 bid, 31 offered from 32 bid, 34 offered previously.

Standard & Poor's meantime said it lowered its corporate credit rating for Remy to CCC from CCC+.

The agency said that the downgrade stems from Remy's inability to improve "very weak" earnings and cash flow, leaving the company with shrinking prospects for meeting its December 2007 maturity of its $145 million senior notes.

S&P noted that Remy recently lowered its earnings guidance for 2006 to a range that is not sufficient to cover the company's cash interest expense. It further said that ratings reflect Remy's "very aggressive leverage," weak EBITDA, near-term debt maturities and limited liquidity.

Collins & Aikman climbs

But not all of the auto parts and systems makers were on the slide Tuesday. Collins & Aikman's 10¾% notes were seen up about a point to 5 bid, 6 offered.

That followed the company's announcement that it has now shifted its focus to selling itself, either whole or in parts, rather than emerging from court protection as a stand-alone company. The company had earlier said in its reorganization plan filed with the Detroit bankruptcy court that it envisioned emerging from Chapter 11 as a standalone company. But it said that recent production cuts by major customers and expected deterioration in the U.S. auto sector prompted the decision to change its focus.

Technical Olympic up despite red ink

Outside of the automotive realm, Technical Olympic's bonds, a trader said. "had a 4 point swing" between its low and high points, before ending up around a point on the session, gyrating after the Hollywood, Fla.-based homebuilder put out third-quarter numbers.

"If you bought them in the morning," when the bonds were down as much as 3 points, "and sold them in the afternoon," after they bounced back, "you were a hero," he said, quoting the company's 10 3/8% notes due 2012 at 88 bid, 89 offered, up from 87 bid, 88 offered at the opening, and well up from the day's lows at 85.5 bid, 86.5 offered.

A trader saw its 9% senior notes due 2010 having risen to 97 bid, 97.75 offered.

Technical Olympic reported a net loss of $80 million ($1.34 per share), compared with net income of $70.3 million, or $1.18 per share a year earlier. The loss is primarily attributable to $203.9 million of charges resulting from the write-down of assets including investments in joint ventures - notably the company's $143.6 million stake in troubled Florida homebuilding joint venture Transeastern - write-off of deposits and abandonment costs and inventory and goodwill impairments.

However, the company said on its conference call that its potential exposure to the problems of Transeastern are limited, and said it was moving to conserve cash and shore up its balance sheet (see related story elsewhere in this issue.)

No U.S. new deals

No domestic issuers priced deals during the Tuesday primary market session.

However Chinese financial and media services provider Xinhua Finance Ltd. priced a $100 million issue of 10% five-year global bonds (B+) at 99.041 to yield 10¼%, at the tight end of the 10¼% to 10½% price talk.

ABN Amro was the bookrunner for the debt refinancing and acquisitions funding deal.

Freescale talks $5.95 billion

However Firestone Acquisition (Freescale Semiconductor) set price talk on its $5.95 billion equivalent six-tranche offering of bonds.

There are two overall classes of notes, senior and senior subordinated, each with its own credit ratings.

An overall $4.35 billion equivalent of senior notes due 2014 (B1/B) are being offered in dollar and euro denominations.

Tranche breakdowns and price talk are as follows:

• Dollar-denominated fixed-rate notes are talked at 9% to 9¼%;

• Dollar-denominated toggle notes are talked 25 to 50 basis points behind fixed-rate notes;

• Dollar-denominated floating-rate notes are talked at Libor plus 400 to 425 basis points; and

• Euro-denominated fixed-rate notes are talked at 8 1/8% to 8 3/8%.

Meanwhile the transaction features $1.6 billion equivalent of 10-year dollar- and euro-denominated senior subordinated notes (B2/B).

Both the dollar-denominated and the euro-denominated subordinated notes are talked at 125 to 150 basis points behind the respective dollar- and euro-denominated tranches of senior fixed rate notes.

The books will close at the end of Wednesday's session, New York time, with pricing to follow mid-day on Thursday.

Credit Suisse has the physical books for the massive LBO financing from the Austin, Tex., semiconductor company.

AmeriCast sets talk

Elsewhere AmeriCast Technologies, Inc. talked its $100 million offering of eight-year senior notes (B3/B-) at 11%, with a par issue price.

The Jefferies & Co.-led deal is expected to price Thursday afternoon.

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